THE  GIFT  OF 

MAY  TREAT  MORRISON 

IN  MEMORY  OF 

ALEXANDER  F  MORRISON 


THE    CITIZEN'S  LIBRARY 


OF 


ECONOMICS,  POLITICS,  AND 
SOCIOLOGY 


EDITED  BY 


RICHARD  T.  ELY,  Ph.D.  ,  LL.D. 

PROFESSOR  OF  POLITICAL  ECONOMY, 
UNIVERSITY  OF  WISCONSIN 


INTERNATIONAL   COMMERCIAL 
POLICIES 

WITH  SPECIAL  REFERENCE  TO  THE 

UNITED  STATES 

A  TEXT  BOOK 


jn^^. 


THE  CITIZEN'S  LIBRARY 

International 
Commercial  Policies 

WITH  SPECIAL  REFERENCE  TO  THE 

United  States 
a  ^va  iBoofe 

BY 

GEORGE  MYGATT  FISK,  Ph.  D. 

Professok  of  Commerce,  University  of  Illinois. 
Formerly  Second  Secretary  of  Am- 
erican Embassy  at  Berlin 

AUTHOR   OF 

Deutsch-Amerikanische  Handelsbeziehungen; 

Handelspolitik  der  Vereinigten  Staaten  1890-1900; 

Middle-European  Tariff  Union,  Etc. 


THE  MACMILLAN  COMPANY 

LONDON:  MACMILLAN  &  CO..  Ltd. 

1907 

All  rislits  reserved 


Copyright,  1907 
By  THE  MACMILLAN  COMPANY 

Set  up  and  electrotyped.    Published  November,  1907. 


'iXi-Ski 


The  MASOX-HE.N'KY  Press 
Syracuse,  New  York 


140 


vs.iii 


(M  lo 

S  ANDREW  D.  WHITE 

association  with   whom  duruig 

nearly  four  years  of  official  life 

Q  at  Berlin  has  been  a  permanent 

5  source  of  inspiration  to  the  author. 


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PREFACE 

An  effort  has  been  made  in  the  present  volume 
to  bring  together  in  a  form  available  for  students 
of  economics  as,  well  as  for  general  readers,  a  sys- 
tematic treatment  of  the  politics  of  international 
commerce.  Such  an  effort  is  beset  with  many 
difficulties.  In  the  first  place  no  method  of  treat- 
ment is  entirely  free  from  all  objections.  Again 
while  there  is  an  abundance  of  literature  on  some 
of  the  topics  considered  in  the  following  pages,  the 
literature  is  very  meagre  as  regards  other  topics. 
As  to  general  works  no  English  books  cover  the 
entire  field  of  international  commercial  politics  al- 
though some  German  writers — notably  Roscher, 
Cohn,  Lexis,  van  der  Borght  and  Grunzel — have 
treated  the  subject  in  a  scholarly  way.  The  author 
wishes  to  make  special  acknowledgments  to  the 
last  named  author  for  frequent  use  which  he  has 
made  of  his  excellent  work.  System  der  Handels- 
politik.  For  services  rendered  he  wishes  also  to 
express  his  appreciation  to  the  officers  and  attend- 
ants of  the  libraries  of  Congress,  University  of 
Illinois,  University  of  Wisconsin  and  Wisconsin 
Historical  Society  and  to  his  colleagues,  professors 
N.  A.  Weston,  M.  H.  Robinson  and  J.  W,  Garner. 
Professors  Weston  and  Robinson  read  the  manu- 
script and  their  criticisms  were  invaluable.  Pro- 
fessor Garner  furnished  valuable  assistance  in  the 


PREFACE 

preparation  of  the  last  two  chapters  on  navigation 
poHcies.  The  author  feels  a  special  debt  of  grati- 
tude to  his  former  teacher,  the  editor  of  Macmillan's 
"Citizen's  Library,"  both  for  earlier  services  in  the 
class  room  at  the  Johns  Hopkins  University  and 
for  reading,  re-reading  and  revising  the  manuscript 
of  the  present  work. 

G.  M.  R 
Champaign,  Illinois, 
October  8,  1907. 


viu 


CONTENTS 


CHAPTER  I. 
Introduction 

PAGE 

1.  General  Statement         ....  3 

2.  Meaning  of  Commerce             ...  5 

3.  ^Materials  of  Commerce           ...  6 

4.  Classification  of  Commerce      ...  7 

5.  Politics    of   Commerce              ...  8 

6.  Political  Control  of  Commerce            .             .  9 

7.  General   Character  of  Ancient  Commerce  -ii 

8.  Development  of  Ancient  Commerce               .  12 

9.  Commercial  Policy  of  the  Middle  Ages          .  14 
10.     Development  of  Mediaeval  Commerce           .  16 

Bibliography,  Suggestive  Topics  and  Questions  iS 


CHAPTER  II. 

Development  of  Modern   Commercial   Politics: 
The  Mercantile  System 


General  Character  of  Early  Modern  Period  21 

General  Character  of  Mercantilism  .  23 

First  and  Second  Phases  of  Mercantilism     .  24 

Third  Phase  of  Mercantilism  .  .  25 

Criticism   of   Mercantilism        ...  27 

Portugal  and  Spain  .  .29 

The  Netherlands  .  .  .  .30 

France  .  .  .  .  .32 

England  .  ....  33 

Bibliography,  Suggestive  Topics  and  Questions      34 


CONTENTS 


CHAPTER  III. 


Development  of  Modern   Commercial  Politics: 
Free  Trade 


20.  Political  and  Economic  Revolt  against  Mer- 
cantilism             .....  37 

21.  The  Physiocratic  System          ...  38 

22.  The  Free  Trade  System            ...  38 
2^.     England                .             .             .             .             -39 

24.  The  United  States         ....  41 

25.  Continental  Europe        ....  42 
Bibliography,  Suggestive  Topics  and  Questions  44 


CHAPTER  IV. 

Development  of  Modern  Commercial  Politics: 
Protection 


26.  General  Character  of   Protection 

27.  Causes  of  Recent  Growth  of  Protection 

28.  Main  Arguments  for  Protection 

29.  The  United  States,  1 789-1887 

30.  The  United  States,  1887-1897 

31.  Present  Situation  in  the  United  States 

32.  France  .... 

33.  Germany  .... 

34.  Other  European  Countries 


47 
48 

49 
51 
S3 
55 
56 
58 
59 
Bibliography,  Suggestive  Topics  and  Questions      60 


CHAPTER  V. 
Customs — General:    Import   Duties. 

35.  Definition  and  Development  of  Customs  Duties  62 

36.  Classification  of  Customs  Duties  .  •  63 

37.  Definition  and  Classification  of  Import  Duties  65 

38.  Present  Importance  of  Import  Duties  .  66 

39.  Who  Pays  the  Tax?  ...  67 

40.  Trusts  and  "Dumping"             ...  69 
Bibliography,  Suggestive  Topics  and  Questions  71 


CONTENTS 

CHAPTER  VI. 
Customs — Export  and  Transit  Duties  :  Prohibitions 


PAGE 

Definition  and  Classification  of  Export  Duties  73 

Revenue  Export  Duties            ...  74 

Protection  Export  Duties          •            •            .  75 

Transit  Duties                ....  76 

Import,  Export  and  Transit  Prohibitions       .  "]"] 

Protection  and  Revenue  Prohibitions               .  78 

Prohibitions  based  on  Sanitary  Grounds  .  79 
Prohibitions  based  on  Moral  or  Religious  Grounds  81 
Prohibitions  based  on  Grounds  of  Public  Security  82 

Bibliography,  Suggestive  Topics  and  Questions  84 

CHAPTER  VII. 

Customs — Tariffs  and  Tariff  Systems 

Introduction                    ....  86 

Contents  of  the  American  Tariff  Act               .  87 

The  Free  List                 .             .             .            .  89 

Tariff  Enactment  and  Administration              .  89 

Territorial  Scope  of  Tariff  Laws        .             .  90 

Revenue  Effect  of  Anticipated  Tariff  Changes  91 

General  or  Autonomous  Tariff  System           .  92 

General  and  Conventional  Tariff  System        .  92 

Maximum  and  Minimum  Tariff  System         .  94 

Bibliography,  Suggestive  Topics  and  Questions  96 


CHAPTER  VIII. 
Customs — Ad  Valorem,  Specific  and  Differential  Duties 

59.  Introduction  ....  98 

60.  Advantages  and  Disadvantages  of  Ad  Valorem 
Duties  .  ...  09 

61.  Advantages  and  Disadvantages  of  Specific  Duties  loi 

62.  General  Method  of  Tariff  Administration       .  102 

63.  Payment  of  Customs  Duties  .  .         104 

xi 


CONTENTS 

PAGE 

64.  Discriminating  Duties  on  Vessels  and  their 
Cargoes               .....  105 

65.  Interstate  Preferential  Duties              .             .  107 

66.  Colonial  Preferential  Duties                 .             .  108 

67.  Countervailing  Duties               .             .             .  109 

68.  Retaliatory  Duties          .            .             .             .110 
Bibliography,  Suggestive  Topics  and  Questions  in 

CHAPTER  IX. 
Customs — Administrative  Institutions 

69.  Ports  of  Entry  and  Ports  of  Delivery  .         115 

70.  Meaning  and  Advantages  of  Bonded  Warehouses  115 

71.  United  States  Bonded  Warehouses  for  Imported 
Goods  .....         116 

^2.  General  Regulations  regarding  United  States 

Bonded  Warehouses  for  Imported  Goods  118 

73.  Free  Ports  .  .  .  .118 

74.  Free  Districts                 ....  120 

75.  Proposed  American  Free  Districts                   .  121 

76.  Frontier  Traffic  in  the  Narrower  Sense  122 
"JT.  Mexican  Free  Zone                   .             .             .  123 

78.  Treaty  Ports  .  .  .  .124 
Bibliography,  Suggestive  Topics  and  Questions     125 

CHAPTER  X. 

Customs — Internal  Taxation  :  Export  and  Import 
Favors 

79.  Internal    Taxes  ....         127 

80.  Internal  Taxes  on  Imported  Merchandise  128 

81.  Internal  Taxes  on  Domestic  Products  destined 

for   Exportation  ....  129 

82.  Drawbacks  .....  130 

83.  Drawback  System  in  the  United  States  .  131 

84.  Direct  or  Open  Bounties  .  .  132 

85.  Indirect  or  Concealed  Export  Bounties  .  134 

86.  International  Sugar-Bounty  Question  .  136 

xii 


CONTENTS 

PAGE 

87.  Free  Re-Importation  of   Unaltered  Domestic 
Articles  .....         137 

88.  Free  Importation  of  Foreign  Articles  to  be  Re- 
exported after  Alteration  or  Repair:  General       139 

89.  Free  Importation  of  Foreign  Articles  to  be  Re- 
exported after  Alteration  or  Repair:  United 
States  .....         140 

90.  Miscellaneous  "Free  List"  Articles  .         140 
Bibliography,  Suggestive  Topics  and  Questions     142 

CHAPTER  XI 

Commercial  Treaties — Their  Nature,  Form  and 
Contents 

91.  Definitions  ....        145 

92.  Development  of  Commercial  Treaties  .         145 

93.  European  Commercial  Treaties  of  the  Free  Trade 
Era  .  .  .  ...         147 

94.  European  Commercial  Treaties  of  the  Protection 
Era  .  .  .  .  .  .147 

95.  What  States  may  negotiate  Commercial  Treaties  ?    148 

96.  Who  may  negotiate  Commercial  Treaties?  149 

97.  Duration  of  Commercial  Treaties  .         150 

151 
151 
152 
154 


98.  Protocol  .  . 

99.  Subject  Matter  of  Commercial  Treaties 

100.  Groups  of  Commercial  Treaties 

101.  Provisions  of  Commercial  Treaties 


Bibliography,  Suggestive  Topics  and  Questions    15S 

CHAPTER  XII. 

Commercial  Treaties — Reciprocity  and  the  Most 
Favored  Nation  Clause 

102.  Meaning  of   Reciprocity  .         161 

103.  First  Phase  of  American  Reciprocity  .         162 

104.  Second  Phase  of  American  Reciprocity  .         162 

105.  Third  Phase  of  American  Reciprocity  .         163 
ic6.     Fourth  Phase  of  American  Reciprocity  .         164 

xiii 


CONTENTS 

PAGE 

107.  Fifth  Phase  of  American  Reciprocity  .  165 

108.  Sixth  Phase  of  American  Reciprocity  .  166 

109.  Seventh  Phase  of  American  Reciprocity          .  167 
no.  Eighth  or  Final  Phase  of  American  Reciprocity  168 

111.  Meaning  of  the  Most  Favored  Nation  Clause  169 

112.  Restricted  (or  American)  Most  Favored  Nation 
Policy                   .....  170 

113.  Unrestricted   (or  European)  Most  Favored  Na- 
tion Policy          .....  171 

114.  Scope  of  the  Most  Favored  Nation  Clause  171 
Bibliography,  Suggestive  Topics  and  Questions  173 

CHAPTER  XIII. 
Public  Trade-Promoting  Institutions 

115.  General  .....         177 

116.  United   States  Department  of   State  .         178 

117.  General  Consular  Service  .  .  -179 
1x8.     Development  of  the  American  Consular  Service    181 

119.  Present  American  Consular  Lavi^  .  .  182 

120.  Recent    Regulations    Governing    Appointments 
and  Promotions  ....  185 

121.  Present    Regulations    Governing    Appointments 
and  Promotions  ....  186 

122.  Regulations  Governing  Examinations  .  187 

123.  Criticism    of    the    Present    American    Consular 
Service                 .....  189 
Bibliography,  Suggestive  Topics  and  Questions  191 

CHAPTER  XIV. 
Public   Trade-Promoting   Institutions    (Continued) 

124.  Commercial    Attaches  192 

125.  Proposal     for     Commercial     Attaches     in  the 
American    Diplomatic    Service  .         192 

126.  United  States  Treasury  Department  .         194 

127.  United  States  Department  of  Agriculture  195 

xiv 


CONTENTS 

PAGE 

128.  United    States    Department    of    Commerce    and 
Labor    (a)    Bureau   of   Statistics:    (b)    Bureau 

of   Manufactures            ....  197 

129.  United  States  War  Department                       .  200 

130.  Trade   Commissions                   .             .             .  201 
Bibliography,  Suggestive  Topics  and  Questions  202 

CHAPTER  XV. 
Quasi-Public  and  Private  Trade-Promoting  Institutions 

131.  General                .....  206 

132.  Commercial    Museums    and    Bureaus    of    Infor- 
mation                 .....  207 

133.  The  Philadelphia  Commercial  Museum  208 

134.  Export  Sample  Warehouses                 .             .  209 

135.  Domestic   Chambers   of    Commerce    in    Foreign 
Countries                          ....  210 

136.  E.Kport  Syndicates          ....  211 

137.  Miscellaneous  Trade-Promoting  Institutions  213 
Bibliography,  Suggestive  Topics  and  Questions  214 

CHAPTER  XVI. 

Commercial  Statistics:  Balance  of  Trade  and  Foreign 
Exchange 

138.  Definition  of  Commercial  Statistics               .  216 

139.  Classification  of  Commercial  Statistics           .  217 

140.  General     Methods     of     Obtaining     Commercial 
Statistics              .....  220 

141.  American    Methods    of    Obtaining    Commercial 
Statistics              .....  219 

142.  Difficulties  of  Statistical  Comparisons              .  221 

143.  Methods  of  Statistical  Comparisons                 .  222 

144.  Meaning  of  Balance  of  Trade              .             .  224 

145.  Visible  Exports  and  Imports                .             .  225 

146.  Invisible  Exports  and  Imports             .             .  226 

147.  How  Balance  are  Adjusted                  .  228 
Bibliography,  Suggestive  Topics  and  Questions  229 


CONTENTS 

CHAPTER  XVII. 
Navigation  Politics 

PAGE 

148.  General                .....  233 

149.  Mare  Clausum               ....  234 

150.  Freedom  of  Navigation            .            .             .  235 

151.  Navigation  Laws           ....  236 

152.  English  Navigation  Policy                    .             .  237 

153.  Navigation  Policy  of  the  United  States          .  238 

154.  Character  of  Shipping  Subsidies           .             .  240 

155.  History  of  Foreign  Shipping  Subsidies  241 

156.  Early  American   Shipping   Subsidy    Policy  242 

157.  Postal   Subsidy  Act  of  1891                 .             .  244 

158.  Arguments  for  and  against  Navigation  Laws  247 
Bibliography,  Suggestive  Topics  and  Questions  248 

CHAPTER  XVIII. 
Public    Navigation- Promoting   Institutions 

159.  General  .  .  .  .  .251 

160.  Bureau     of    Navigation    and     Shipping    Com- 
missioners                        ....  252 

161.  Steamboat-Inspection  Service              .            .  253 

162.  Light-House   Board                    .             .             .  253 

163.  Coast  and  Geodetic  Survey                  .             .  254 

164.  Public  Health  and  Marine  Hospital  Service  255 

165.  Life-Saving  Service                   .             .             .  256 

166.  Revenue  Cutter  Service             .             .             .  256 

167.  Navy  Department          ....  257 
Bibliography,  Suggestive  Topics  and  Questions  258 

General    Bibliography                ....  259 

Index                  ...,,.  273 


INTERNATIONAL 
COMMERCIAL  POLICIES 


CHAPTER   I. 

INTRODUCTION 

I.  General  Statement. — There  run  through  the 
writings  of  early  authors  on  economic  subjects  two 
prominent  ideas  regarding  commerce,  one  relating 
to  its  value  and  the  other  to  its  content.  As  re- 
gards the  former  Montesquieu,  the  immortal  writer 
of  the  "Spirit  of  Laws,"  has  tersely  said:  "the 
effect  of  commerce  is  riches;  the  consequence  of 
riches,  luxury;  and  that  of  luxury,  the  perfection 
of  arts."  The  emphasis  laid  on  not  only  the  ma- 
terial but  also  the  cultural  value  of  commerce  by 
early  writers — a  characteristic  almost  lacking  in 
economic  literature  of  the  present  day — is  not  diffi- 
cult to  understand.  Trade  among  early  civilized 
peoples,  especially  among  the  Greeks  and,  to  a 
greater  extent,  the  Romans  was  largely  in  the 
hands  of  foreigners  and  was  essentially  piratical 
in  character.  These  conditions  stamped  trade  as 
an  unworthy  occupation  and  perpetuated  traditions 
and  prejudices  which  have  taken  centuries  to  eradi- 
cate. The  civilized  world  has,  however,  been 
gradually  converted  and  but  few  writers  of  the 
present  time  think  it  worth  while  to  demonstrate 
that  the  material  advantages  of  trade  are  mutual 
and  that  commercial  intercourse  is  civilizing  in  its 
effects. 

3 


....COMMERCIAL     POLICIES 

As  regards  the^  second  characteristic,  the  content 
of/c'v)rnj:riei'*;e;  ,i;:  iti?iy.  be',  stated  that  the  ancients  did 
not  discriminate  between  commerce  in  its  restricted 
and  in  its  general  sense;  that  is,  they  did  not  dif- 
ferentiate commerce  from  navigation,  transportation 
and  communication,  money  and  banking,  and  even, 
in  some  instances,  from  general  industry  or  from 
political  economy.  They  used  the  term  in  much 
the  same  sense  in  which  in  modern  phraseology  we 
speak  of  commercial  education  and  schools  of  com- 
merce, meaning  thereby  much  more  than  mere 
studies  of  trade  or  even  of  general  economics. 
The  complex  character  of  modern  industrial  life  has 
led  to  a  high  degree  of  specialization  not  only  in  art 
but  also  in  science.  Such  subjects  as  transporta- 
tion and  communication,  or  money  and  banking, 
have  become  so  important  and  also  so  complex  that, 
although  of  course  recognized  as  perhaps  the  most 
important  instruments  of  commerce,  they  are  treated 
as  special  subjects  in  themselves  rather  than  as 
synonymous  with  commerce.  It  should  also  be 
noted  in  this  connection  that  there  is  a  legal  con- 
ception of  commerce  which  may  be,  and  in  fact 
usually  is,  different  from  the  economic  use  of  the 
term.  While  economically  considered  the  meaning 
of  commerce  tends  to  become  more  and  more  re- 
stricted, legally  considered  the  opposite  tendency  is 
observable  at  least  so  far  as  the  federal  government 
of  the  United  States  is  concerned,  since  the  inter- 
pretation given  by  the  Supreme  Court  to  the  mean- 
ing of  commerce  as  used  in  the  Constitution  is 
much   more    extensive   now   than    formerly.      This 

4 


INTRODUCTION 

discussion  naturally  brings  us  to  a  consideration  of 
the  meaning  of  commerce  and  its  relation  to  eco- 
nomics and  industry.  In  the  treatment  of  the  sub- 
ject in  the  present  text  the  term  commerce  is  used 
in  its  restricted  rather  than  in  its  broad  meaning. 

2.  Meaning  of  Commerce. — Political  economy, 
or  economics,  deals  with  those  activities  of  man 
which  are  directed  toward  getting  a  living.  It 
has  often  been  defined  as  the  science  of  wealth. 
Wealth  in  the  economic  sense  consists  of  those 
goods  and  services  which  are  useful  to  man,  which 
possess  utilities.  These  may  be  classified  into  ele- 
mentary or  material,  form,  time,  place  and  quantity 
utilities.  Both  industry  and  commerce  are  impor- 
tant parts  of  the  economic  life  of  society.  The 
former  is  primarily  concerned  with  the  creation  of 
form  utilities  and  the  latter  with  those  of  time, 
place  and  quantity.  The  agent  in  industry  is  the 
manufacturer;  in  commerce,  the  merchant.  The 
separation  between  the  two  is  never  complete  either 
in  theory  or  in  practice.  Theoretically,  many  mod- 
ern economists  treat  commerce  as  merely  a  part  of 
economic  production  on  the  ground  that  the  latter 
is  incomplete  until  goods  which  have  been  manu- 
factured or  produced  are  put  into  the  hands  of 
final  consumers.  In  practice  there  are  many  occu- 
pations in  which  the  manufacturer  and  distributor 
or  merchant  are  united.  A  simple  illustration  is 
that  of  the  baker  who  not  only  makes  the  bread,  but 
often  offers  it  for  sale  to  final  consumers.  While 
the  development  of  the  division  of  labor  has  tended 
toward  a  differentiation  of  industry  and  commerce, 

5 


COMMERCIAL    POLICIES 

the  latest  phase  of  industrial  consolidation  has  led 
in  many  instances  to  a  closer  union.  Giant  con- 
cerns like  the  United  States  Steel  Corporation  and 
the  Standard  Oil  Company  are  both  industrial  and 
commercial  institutions.  They  are  engaged  not 
only  in  the  creation  of  form,  but  also  of  place,  time 
and  quantity  utilities. 

Commerce  is  defined  in  the  dictionary  as  "the 
exchange  or  buying  and  selling  of  commodities, 
especially  the  exchange  of  merchandise  on  a  large 
scale."  It  is  characterized  as  trade  in  its  most 
extended  form.  The  terms  "commerce"  and 
"trade"  mean  very  much  the  same  thing,  although 
the  former  often  refers  to  commercial  dealings 
between  nations,  while  the  latter  is  more  often  ap- 
plied to  internal  mercantile  intercourse.  Thus  we 
speak,  on  the  one  hand,  of  the  foreign  commerce  or 
commercial  relations  of  the  United  States  and,  on 
the  other  hand,  of  the  wholesale  or  retail  trade  of 
individual  merchants. 

When  goods  have  been  manufactured  they  must 
be  distributed  to  those  places  where  consumers  are 
to  be  found,  held  until  they  are  wanted  and  fur- 
nished in  desired  quantities.  That  branch  of  eco- 
nomics which  thus  serves  as  a  bridge  between 
initial  producers  and  final  consumers  by  creating 
the  necessary  place,  time  and  quantity  utilities,  is 
commerce. 

3.  Materials  of  Commerce. — The  materials  of 
commerce  are  variously  designated  as  goods,  com- 
modities, merchandise,  wares  or  products.  While 
these  terms  are  often  used  indiscriminately,  their  sig- 

6 


INTRODUCTION 

nificance  is  not  always  the  same.  Owing  to  the  dif- 
ference in  usage  in  different  countries  or  even  in 
different  parts  of  the  same  country,  fixed  definitions 
are  difficuU  to  frame.  The  term  goods  usually  means 
transferable  articles  of  portable  or  personal  prop- 
erty such  as  are  intended  for  sale  or  might  realize 
a  money  value  if  sold.  Thus  we  speak  of  dry- 
goods,  fancy  goods,  high-priced  goods,  the  goods 
of  the  merchant  and  the  like.  A  commodity  is  any- 
thing movable  that  is  a  subject  of  trade  or  of  ac- 
quisition. Goods  and  commodities  are  nearly  syn- 
onymous. The  former  term  is  somewhat  more 
comprehensive  than  the  latter  which  usually,  but 
not  always,  refers  to  articles  of  necessity.  Mer- 
chandise is  the  generic  term  for  all  portable  articles 
of  trade  considered  as  such  in  the  aggregate.  The 
American  trade  statistics,  for  instance,  refer  to  the 
exportation  of  articles  of  domestic  merchandise, 
meaning  thereby  the  sum  total  of  all  articles  of 
domestic  production  exported  to  other  countries. 
The  term  zvare  or  zvares  designates  the  sum  of  arti- 
cles of  a  particular  kind  or  class.  It  is  often  used 
in  composition  as  in  hardware,  glassware  or  tin- 
ware. Webster  defines  a  product  as  anything  that 
is  produced,  whether  as  the  result  of  generation, 
growth,  labor  or  thought,  or  by  the  operation  of 
involuntary  causes.  We  speak  of  the  products  of 
the  season  or  of  the  farm,  the  products  of  manu- 
factures, the  products  of  the  brain,  etc. 

4.  Classification  of  Commerce. —  Trade  is  either 
wholesale  or  retail.  The  latter  may  be  defined  as 
sales  to  the  final  consumer  and  the  former  as  mer- 

7 


COMMERCIAL    POLICIES 

cantile  transactions  among  all  classes  except  the 
final  consumer.  Usually,  but  not  always,  wholesale 
trade  is  in  larger  values  than  retail  trade.  Com- 
merce is  also  divided  into  domestic  trade,  carried  on 
entirely  within  the  boundaries  of  a  particular  coun- 
try, and  foreign  or  international  trade  between  in- 
dividuals of  different  nations.  The  present  work 
has  to  do  primarily  with  foreign  commerce  which 
is  divided  into  various  classes.  Import  trade  com- 
prises dealings  in  those  goods  brought  into  a  coun- 
try from  foreign  localities ;  export  trade  refers  to 
shipments  sent  out  of  a  country;  and  transit  trade 
is  trafific  passing  through  third  countries  en  route 
from  one  country  to  another.  Trade  passing  be- 
tween two  countries  via  third  countries  is  charac- 
terized as  indirect  trade  in  contradistinction  to 
direct  trade,  or  trade  passing  directly  between  two 
countries.  Foreign  commerce  is  also  classified  as 
land  trade  and  sea  trade.  Where  a  country  em- 
ploys home  capital  and  labor  in  carrying  on  its  for- 
eign trade  its  commerce  is  called  active,  while  on 
the  other  hand,  if  its  foreign  trade  is  carried  on  by 
foreign  merchants  its  trade  is  characterized  as 
passive.  The  foreign  commerce  of  all  countries, 
taken  in  its  entirety,  is  called  world  commerce. 

5.  Politics  of  Commerce. — Political  science  is 
the  science  of  government ;  politics  is  the  art  of 
governing.  The  former  deals  wdth  principles, 
while  the  latter  has  to  do  with  practice,  and  finds 
formal  expression  in  law.  While  good  government 
is  a  necessity  for  commercial  development  and 
nearly  all  governmental  regulations,  such  as  those 


INTRODUCTION 

relating  to  education,  private  property,  revenue  or 
communication,  influence  commerce  more  or  less, 
only  those  affecting  it  directly  and  consciously 
belong  to  the  sphere  of  commercial  politics.  Com- 
mercial politics,  therefore,  comprises  the  laws,  in- 
stitutions and  executive  methods  by  means  of  which 
the  sovereign  will  controls  commerce.  While  the 
activities  of  the  government  are  generally  directed 
toward  increasing  commerce,  this  is  not  always  the 
case.  In  fact,  many  laws  such  as  protective  tariff 
regulations  often  aim  to  discourage  commerce ; 
others,  especially  those  of  a  police,  moral  or  sani- 
tary character,  as,  for  example,  laws  relating  to  the 
sale  of  fire  arms,  intoxicating  liquors  or  adulterated 
foods  are  often  prohibitory.  The  aim  of  all  laws 
regulating  commerce  should  be  to  benefit  society  at 
large.  There  is  no  other  justification  for  law, 
whether  it  be  to  regulate  commerce  or  any  other 
activity. 

6.  Political  Control  of  Commerce. — In  the  Mid- 
dle Ages  the  political  control  of  commerce  was  vested 
theoretically  in  the  central  government  represented 
by  the  king.  Owing,  however,  to  the  lack  of  effec- 
tive centralization  the  power  to  regulate  commerce 
came  more  and  more  under  the  control  of  local  quasi- 
public  corporations  or  guilds.  This  control  became 
nearly  absolute  and  extended  over  both  domestic 
and  foreign  commerce.  In  strongly  centralized 
governments,  such  as  those  of  modern  England, 
France  or  Italy,  the  control  of  commerce  is  largely 
concentrated  in  the  hands  of  the  central  govern- 
ment;  but  in  federal  states,  like  the  United  States 

9 


COMMERCIAL    POLICIES 

or  the  German  Empire,  where  there  is  a  division  of 
power  between  central  and  local  authority,  foreign 
commerce  is  largely  under  the  control  of  the  former 
while  domestic  commerce  comes  more  naturally 
under  the  purview  of  the  latter.  The  situation  in 
the  United  States  in  this  particular  is  interesting. 
Although  the  American  colonies  were  constantly 
interfered  with  by  the  mother  country,  the  political 
troubles  of  England  at  home  and  on  the  Continent, 
coupled  with  the  dangers  of  navigating  the  broad 
Atlantic  which  lay  between  her  and  her  colonists, 
resulted  in  the  latter  having,  in  a  large  measure, 
their  own  way  in  matters  of  government.  Their 
constant  struggle,  however,  for  both  economic  and 
political  existence  developed  in  the  English  resi- 
dents of  the  New  World  strong  sentiments  of  self- 
government.  When  separation  from  the  mother 
country  came,  the  several  states  retained  control 
over  commerce,  only  the  shadow  of  power  being 
delegated  to  the  so-called  central  government 
operating  under  the  Articles  of  Confederation.  It 
was  the  lack  of  effective  central  control  over  com- 
merce which  was  one  of  the  most  decisive  factors 
in  giving  birth  to  the  Constitution.  By  this  in- 
strument Congress  was  given  the  power  "to  regu- 
late commerce  with  foreign  nations  and  among  the 
several  states  and  with  the  Indians."  In  other 
words,  the  federal  government  of  the  United  States 
has  control  over  foreign  and  interstate  commerce, 
while  control  over  strictly  domestic  commerce  is 
retained  by  the  several  states. 


lO 


INTRODUCTION 

7.  General  Character  of  Ancient  Commerce. — 

Early  trading  peoples  were  organized  on  a  municipal 
or  local  basis  as  is  sufficiently  suggested  by  the  names 
of  Tyre,  Carthage,  Athens,  Rhodes  and,  in  more  re- 
cent time,  Venice  and  many  other  cities  of  Western 
Europe.  Later  city-leagues,  such  as  Hansa,  were 
organized  on  a  quasi-national  basis  for  purposes  of 
commercial  protection  and  expansion.  Finally  na- 
tional life  began  with  the  dawn  of  modern  history. 
Early  civilization  usually  lacked  the  three  essentials 
for  the  development  of  commerce  on  a  large  scale 
— means  of  transportation  and  communication, 
security  and  freedom  of  labor  and  of  exchange. 
The  absence  of  transportation  and  communication 
facilities  caused  the  materials  of  commerce  to  be 
confined  largely  to  objects  of  great  value  and  small 
bulk.  As  regards  freedom  of  labor  and  exchange 
it  may  be  said  that  the  political  institutions  of  the 
ancient  world  were  utterly  neglectful  of  the  liberty, 
industry  and  property  of  the  masses.  Insecurity 
caused  commerce  to  be  carried  on  by  armed  forces 
in  the  form  of  caravans  on  the  land  and  the  con- 
voy on  the  sea.  Ancient  commerce  was  largely 
trade  of  civilized  with  less  civilized  or  barbarous 
peoples.  The  latter  distrusted  and  feared  the 
former,  and  warfare  ending  in  annihilation,  slavery 
or  a  state  of  colonial  dependence  was  generally  the 
fate  of  the  less  civilized  combatant.  This  distrust 
of  the  foreigner  was  a  characteristic  of  the  ancient 
world  and  was  strengthened  by  the  fact  that  much 
of  the  trade  in  those  times  was,  as  already  stated, 
carried  on  by  non-residents  and  partook  more  or 

II 


COMMERCIAL    POLICIES 

less  of  the  nature  of  plunder  and  piracy.  Com- 
merce is  early  times  was,  however,  favored  by  one 
mollifying  factor — the  ancient  right  of  hospitality 
which  extended  a  protecting  arm  to  the  stranger, 
and  was  about  the  only  form  of  personal  contact 
among  foreigners.  Its  origin  is  uncertain,  but 
probably  is  traceable  to  the  Phoenicians. 

8.  Development  of  Ancient  Commerce. —  The 
earliest  civilizations  in  historic  times  were  those 
centering  about  the  great  river  valleys  of  the  Nile, 
the  Tigris,  and  Euphrates,  and  perhaps  also  about 
the  river  valleys  of  Southern  and  South  Eastern 
Asia.  The  desert  between  Egypt  on  the  West  and 
the  civilized  nations  to  the  East  was  pierced  by  the 
Arabs  who  were  the  great  land  merchants  of  an- 
tiquity. They  were  organized  in  caravans  and  were 
under  no  other  form  of  government  than  the  regu- 
lations which  the  members  of  the  caravan  imposed 
upon  themselves.  The  Phoenicians  were  the  great- 
est commercial  people  of  antiquity.  Centrally  lo- 
cated on  the  eastern  coast  of  the  Mediterranean 
between  the  raw  producing  countries  to  the  West 
and  the  manufacturing  producing  countries  to  the 
East,  they  developed  an  enormous  land  and  sea 
trade.  The  former  was  carried  on  to  the  eastward 
by  means  of  caravans  with  regularly  established 
resting  and  trading  stations.  Their  sea  trade  ex- 
tended along  the  littorals  of  the  Mediterranean, 
Black  and  Red  Seas  as  well  as  along  the  coasts  of 
the  Atlantic  and  Indian  oceans,  and  was  carried  on 
by  convoys — armed  ships  of  war  accompanying 
merchant  vessels   which   were   likewise  armed   for 


INTRODUCTION 

protection.  Trading  posts  were  established  along 
the  coasts,  some  of  which,  such  as  Carthage,  became 
important  cities.  They  were  controlled  for  the  most 
part  by  officers  sent  out  by  the  home  government. 
The  entire  commerce  of  Phoenicia  was  highly  or- 
ganized by  and  centralized  in  the  government  of  the 
Phoenician  cities  of  Tyre  and  Sidon,  and  these 
cities  became  not  only  great  commercial  but  also 
great  industrial  centres. 

Both  the  Greeks  and  the  Romans  had  a  strong 
antipathy  against  commerce.  The  former  largely 
overcame  this  prejudice,  but  the  latter  never  did. 
Early  Greek  commerce  was  largely  carried  on  by 
foreigners,  especially  by  the  Phoenicians,  but  as 
the  Greeks  developed  their  trade  by  establishing 
colonies  along  the  shores  of  neighboring  seas,  they 
became  more  and  more  actively  engaged  in  com- 
merce. The  Greeks  inherited  the  general  com- 
mercial policy  of  the  Phoenicians,  but  they  hardly 
improved  upon  it  because  while  Phoenician  com- 
merce was  highly  centralized  for  many  centuries  in 
one  or  at  most  two  cities,  Greek  commerce  was 
politically  dominated  at  different  intervals  by  differ- 
ent Greek  cities.  While  Roman  colonial  policy 
was  one  of  ruthless  exploitation,  her  general  com- 
mercial policy  was  largely  passive.  She  established 
conditions  of  peace  and  security  upon  the  sea  by 
suppressing  piracy  throughout  the  Mediterranean, 
and  upon  the  land  by  means  of  her  roads  and  her 
superb  military  system ;  but  her  commerce — the 
supplying  of  her  large  population  with  articles  of 


COMMERCIAL    POLICIES 

necessity  and  luxury — was  largely  in  the  hands  of 
foreigners,  especially  the  Greeks. 

9.  Commercial  Policy  of  the  Middle  Ages. — 
No  national  commercial  policy  was  evolved  in  an- 
tiquity or  during  the  Middle  Ages.  In  both  periods 
the  policy,  as  has  been  said,  was  essentially  mu- 
nicipal in  character.  The  Mediaeval  city  policy, 
nevertheless,  showed  some  advancement  over  the 
policy  of  the  earlier  period,  both  in  domestic  affairs 
centering  in  the  market  regulations  and  in  foreign 
affairs,  relating  especially  to  fairs,  factories,  consuls, 
and,  during  the  latter  part  of  the  Middle  Ages,  to 
the  organization  of  city  leagues.  Commercial  cen- 
tres were  much  more  numerous  in  the  Middle  Ages 
than  in  antiquity  and  developed  not  only  along  the 
coast  as  in  the  earlier  period,  but  at  numerous  in- 
land points.  The  city  leagues  were  quasi-national 
in  character  and  may  be  regarded  as  forerunners  of 
the  modern  state  or  nation.  The  general  character 
of  Mediaeval  commercial  politics  is  reflected  in 
various  governmental  regulations  more  or  less  com- 
mon in  Western  Europe.  These  regulations  re- 
lated to  both  foreign  and  domestic  trade.  An  im- 
portant institution  affecting  primarily  the  former 
was  the  factory  located  in  foreign  countries.  This 
was  usually  a  single  warehouse  at  first,  but  often 
developed  to  include  whole  quarters  in  a  foreign 
city.  In  these  factories  home  merchants  dwelt, 
carried  on  trade  and  administered  law  through 
officers,  known  as  consuls,  selected  sometimes  by 
themselves,  but  more  often  by  the  home  govern- 
ment.    The  rights  which  these  merchants  enjoyed 

14 


INTRODUCTION 

were  usually  based  upon  concessions  granted  by 
the  sovereign  in  whose  territory  the  factory  was 
located.  At  home  all  matters  relating  to  foreign 
trade  were  most  minutely  regulated,  such  as  the 
time  of  departure  of  vessels,  the  order  en  route,  the 
object  of  the  trip,  the  return  voyage,  the  armament, 
etc.  Every  effort  was  made  to  keep  trade  as  much 
as  possible  in  the  hands  of  native  citizens.  For  ex- 
ample, the  Venetians  forbade  the  Germans  from 
engaging  in  trade  with  the  East  by  way  of  Venice, 
and  the  citizens  of  Liibeck  strove  to  keep  the  Baltic 
trade  from  the  Dutch. 

In  the  more  domestic  commercial  politics  the 
spirit  of  exclusiveness  also  prevailed.  Foreigners 
were  mistrusted  and  partnerships  with  them  were 
forbidden.  Foreign  visitors  were  restricted  in 
many  ways  in  their  commercial  dealings  with  native 
citizens.  Many  occupations  were  closed  to  them ; 
the  length  of  their  sojourn  and  the  number  of  their 
visits  were  limited ;  they  could  not  pass  a  town 
without  exposing  their  wares  for  sale  and  paying 
the  required  market  dues.  The  wants  of  the  con- 
sumer took  precedence  over  those  of  the  producer 
or  merchant.  At  the  weekly  markets  consumers 
could  supply  their  ueeds  before  the  baker  or  mer- 
chant was  allowed  to  make  purchases.  There  was 
a  community  interest  in  the  supplies  of  necessities 
and  often  their  exportation  was  prohibited.  The 
trade  of  neighboring  peasants  was  restricted  to  the 
home  city,  and  laws  regulating  price,  weight,  meas- 
ure and  quality  were  common.  This  restrictive 
municipal   policy   was    very    much   relaxed   at   the 

15 


COMMERCIAL    POLICIES 

great  fairs  which  were  held  periodically  in  various 
parts  of  Europe. 

10.  Development  of  Mediaeval  Commerce. — 
After  the  Roman  Empire  of  the  West  came  to  an 
end,  nominally  in  476  A.  D.,  and  all  Western 
Europe  was  overrun  by  barbarian  hordes,  commerce 
was  in  a  more  or  less  chaotic  state  for  the  next  five 
hundred  years.  Such  trade  as  remained  was  cen- 
tered in  the  Mediterranean  countries  and  was 
largely  in  the  hands  of  the  Greeks  and,  after  the 
Mohammedan  conquests,  of  the  Arabs.  During 
this  period  the  growth  of  feudalism  and  the  rise  of 
towns  both  fostered  decentralization,  while  the  only 
centralizing  force  was  in  the  Church.  The  most 
important  factor  in  causing  a  reawakening  of  com- 
merce was  the  Crusades.  Toward  the  close  of  the 
tenth  century  the  Turks  overran  Western  Asia  and 
captured  Jerusalem.  Fired  by  religious  fanaticism, 
by  the  spirit  of  adventure  and  by  the  fear  lest  the 
remnants  of  trade  between  the  East  and  the  West 
would  be  destroyed,  the  peoples  of  Western  Europe 
undertook  a  series  of  Crusades  against  the  "In- 
fidels," covering  a  period  of  about  two  hundred 
years  and  involving  the  transportation  of  millions 
of  human  beings  toward  the  East.  The  effects  of 
the  Crusades  were  far-reaching.  Politically,  they 
broke  the  backbone  of  feudalism  by  attracting  to 
the  Orient  large  numbers  of  the  nobility,  many  of 
whom  failed  to  come  back  or  who  returned  bank- 
rupt. This  great  movement,  therefore,  increased 
the  power  of  the  Crown  and  of  the  burgher  class  in 
the  cities.     Contact  with   the  more   advanced   By- 

16 


INTRODUCTION 

zantine  and  Arabic  culture  for  two  hundred  years 
taught  Western  Europe  many  lessons  in  civilization. 
It  gave  an  enormous  impetus  to  commerce  and  in- 
dustry not  only  by  the  direct  demands  it  made  for 
means  of  transportation  and  for  general  equipment 
in  the  way  of  food,  clothing  and  munitions  of  war, 
but  also  indirectly  by  increasing  the  wants  of  the 
people  for  Eastern  commodities.  To  meet  these 
new  requirements  old  commercial  centres  grew 
into  new  life  and  many  new  cities  sprang  up  in 
Western  Europe.  Flanders  became  the  great  in- 
dustrial centre  of  Northwestern  Europe,  while  the 
cities  of  Northern  Italy,  especially  Venice,  centrally 
situated  along  the  new  lines  of  trade  between  the 
East  and  West,  became  rich  and  powerful.  It  was 
during  this  period  also  that  the  great  city  leagues 
were  formed,  the  most  important  of  w'hich  was 
Hansa.  This  was  originally  a  league  formed 
between  Hamburg  and.  Liibeck  in  the  early  part  of 
the  thirteenth  century  for  the  purpose  of  protecting 
the  trade  between  these  two  centres.  It  grew  very 
rapidly  and  soon  numbered  nearly  one  hundred 
cities  in  Northern  Europe.  Its  government  was  a 
confederacy  with  its  capital  at  Liibeck.  Organized 
at  first  as  a  purely  protective  commercial  associa- 
tion, it  soon  assumed  important  political  preroga- 
tives. It  possessed  a  powerful  fleet  and  an  army 
and  these,  together  with  its  factories  at  London, 
Bruges,  Bergen,  Novgorod  and  at  other  places, 
where  special  trading  privileges  were  enjoyed, 
enabled  it  to  protect  effectively  its  own  interests 
and  to  dominate  commercial  and  industrial  activity 
2  17 


COMMERCIAL    POLICIES 

in  the  North  of  Europe  as  Venice  did  in  the  South. 
In  spite  of  its  monopolistic  tendencies  it  did  much 
for  the  civihzation  of  Western  Europe.  The  se- 
curity which  it  gave  to  commerce  and  industry,  not 
only  among  its  own  members  but  among  foreigners 
with  whom  it  traded,  did  much  to  increase  the 
wealth,  standard  of  living  and  art  impulses  of 
Europe  and  to  accustom  its  inhabitants  to  the  prin- 
ciples of  orderly  government,  thereby  paving  the 
way  for  constitutional  government.  With  the 
growth  of  effective  national  governments  in  the 
fifteenth  and  sixteenth  centuries,  the  services  of  the 
city  leagues  became  unnecessary  and  they  did  not 
long  outlive  their  usefulness. 

BIBLIOGRAPHY 

Note,  (i)  For  a  general  bibliography  on  the  subject 
of  international  commercial  politics;  (2)  for  an  explana- 
tion of  the  arrangement  of  the  special  bibliographies  at 
the  close  of  each  chapter;  (3)  for  an  interpretation  of  all 
abbreviations  in  the  special  bibliographies,  consult  the 
General  Bibliography  at  the  end  of  the  book.  Books 
marked  (*)  are  regarded  as  specially  desirable  and  those 
marked   (**)   as  indispensable. 

C.  "Commerce"  in  (a)  Dictionaries  and  Encyclopaedias 
(*Am.  and  Eng.  Encyc.  Law,  Bouvier's  Law  Diet.,  Con- 
rad's Handw.  der  Staatsw.,  Elster's  Worterb,  der  Volksw., 
*Encyc.  Brit.,  Guyot  et  Raffalovich  Diet,  du  Com.,  Harp- 
er's Diet.,  Larned's  Hist,  for  Ready  Ref.,  Lalor's  Cyclop, 
and  Palg.  Diet.)  (b)  *Economics,  texts  on  (Bullock,  Ely, 
Fawcett,  Fetter,  Gide,  Mill,  Nys,  Ricardo,  Seager,  Selig- 
man,  Smith,  Walker,  et  al.).  (c)  English  Indus.  His- 
tories (Ashley.  Cheyney,  Cunningham,  Gibbins,  Price, 
Rogers),  (d)  Writings  of  various  authors  (Aristotle, 
Cicero,     Hume,     Macchiavelli.     **Montesquieu,     Bk.     XX, 

18 


INTRODUCTION 

Plato).  For  additional  writers  on  Commerce  consult 
Cossa's  Introd.  and  ^Ingram's  Hist.  Pol.  Econ.).  (e) 
Poole's  Index  and  other  indexes  to  periodical  literature. 

D.  Adams  Com.  Geog.,  Adam's  Relation  of  State  to 
Indus.  Action,  Beers,  Gesch.  des  Welth.,  Biicher's  Indus. 
Evol.,  van  der  Borght,  Handel  u.  Handelsp.,  Ch.  I. -II., 
Chisholm's  Com.  Geog.,  Clow's  Introd.,  Cohn's  Handels., 
Cunningham's  Western  Civil.,  *Day's  Hist,  of  Com.,  Gan- 
nett, Garrison  and  Houston's  Com.  Geog.,  Ehrenberg's 
Der  Handel  and  Zeitalt.  d.  Fiigger,  Farrer's  State,  Gib- 
bin's  Hist,  of  Com.,  Griinzel's  Handelsp.,  pp.  1-12,  Hobson's 
Inter.  Trade,  Prentice  and  Egan,  Com.  Clause,  Pigon- 
neau's  Hist,  du  Com.,  Roscher's  Handel,  PI  Ch.  I.,  Seeley's 
Exp.  of  Eng.,  Speck's  Handslsg.  der  Alt.,  Stickney's  State 
Control,  Trotter's  Geog.  of  Com.,  Webster's  Hist,  of  Com, 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  What  is  the  meaning  of  "Commerce"  as  used  in  the 
American  Constitution  (Art  "Commerce"  in  Am.  and  Eng. 
Encyc.  Law;  also  Bouvier's  Law  Diet.,  Prentice  and  Egan, 
Com.  Clause.)  Make  careful  abstract  of  one  of  the  deci- 
sions of  the  Supreme  Court  on  this  point. 

2,  Is  the  division  of  labor  the  c_use  of  commerce? 
(Biicher  Indus.  Evol.,  303  et  seq). 

3.  Is  there  any  way  of  estimating  the  service  of  com- 
merce in  preparing  a  modern  dinner?  (Outlook  Mar. 
13th,   1897:  quoted  in  Clow's  Introd.,  pp.   193-194). 

4.  Define  "ancient  right  of  hospitality"  (Cohn's  Han- 
dels, p.  28;  Biicher  Indus.  Evol.,  p.  62). 

5-  Give  examples  of  laws  aimed  to  discourage  trade 
in  certain  articles ;  exar.iples  of  trade  prohibitions.  Can 
you  give  examples  of  one  state  encouraging  the  sale  of  an 
article  which  another  state  prohibits  the  buying  or  selling 
of? 

6.  What  power  over  commerce  did  the  central  govern- 
ment of  the  United  States  have  prior  to  1789?  (Articles 
of  Confederation.) 

7.     How    does    war   affect   commerce?     Do   commercial 
19 


COMMERCIAL    POLICIES 

nations   generally    oppose    war?     (Seeley's    Exp.    of    Eng., 
Ch.  VI.,  Scrib.  M.,  Mar.  '02). 

8.  What  is  the  position  of  the  United  States  as  a 
peace  maker?     (World's  Work,  May.  1902). 

9.  Compare  Anglo-Saxon  and  German  attitude  as  re- 
gards State  regulation  (Adam's  Relation  of  State  to  Indus. 
Action). 

10.  Give  examples  to  show  how  commerce  is  influenced 
by  climate,  soil,  navigable  rivers,  mountains,  coast  line, 
religion,  government  (Consult  any  text  on  Com.  Geog. ; 
also  Montesquieu  Bk.  xx). 

11.  May  the  same  trade  be  at  one  time  domestic  and 
at  another  time  foreign?     Examples. 

12.  How  does  the  domestic  trade  of  the  United  States 
compare  in  value  with  its  foreign  trade?  (Adam's  Com. 
Geog.,  p.  163;  Gide,  p.  346,  Seager,  p.  368.) 

13.  On  an  average  ho.v  many  times  will  an  article  be 
exchanged  on  its  way  from  he  producer  to  the  final  con- 
sumer? (Walker's  Discussion,  Vol.  II.,  p.  8).  On  this 
basis  what  would  be  the  ratio  between  the  value  of  Amer- 
ican domestic  and  foreign  commerce? 

14.  Homer  relates  in  the  Odyssey  that  Ulysses  be- 
came indignant,  when  skirting  the  coast  of  Phoenicia,  at 
being  taken  for  a  merchant  by  the  Phoenicians  who 
wished  to  trade  with  Lim.  What  does  this  show  as  to  the 
p-obable  attitude  of  the  Greeks  and  Phoenicians  toward 
commerce  ? 

15.  Is  it  strictly  correct  to  speak  of  commerce  between 
nations?     What  do  we  really  mean  by  the  phrase? 

16.  What  did  the  former  German  Chancellor  von 
Caprivi  mean  when  he  said  that  Germany  had  reached  an 
industrial  position  where  she  must  either  export  men  or 
goods?  What  does  this  show  as  to  the  relative  value  of 
German  domestic  and  foreign  trade? 


20 


CHAPTER    II. 

DEVELOPMENT   OF  MODERN   COMMERCIAL 
POLITICS:  THE  MERCANTILE  SYSTEM 

II.  General  Character  of  the  Early  Modern 
Period. —  There  are  several  marked  characteristics 
which  distinguish  European  civilization  of  the  past 
four  hundred  years  from  that  of  the  preceding 
thousand  years.  The  power  and  wealth  of  the  com- 
mercial and  industrial  classes  had  been  increased, 
largely  as  a  result  of  the  Crusades.  Wealth  had 
developed  a  leisure  class  and  wealdi  and  leisure 
had  furnished  the  proper  basis  for  the  growth  of 
the  finer  tastes.  The  literary  phase  of  this  general 
movement  found  expression  in  the  so-called  Ren- 
aissance or  revival  of  the  almost  forgotten  literary 
classics  of  the  Graeco-Roman  world.  Dante,  Pe- 
trarch, Colet,  Erasmus  and  More  figure  prominently 
in  this  connection.  Artistically  the  movement  ex- 
pressed itself  in  the  building  of  magnificent  cathe- 
drals, in  sculpture  and  in  painting.  A  galaxy  of 
great  names,  such  as  Michelangelo,  Leonardo  da 
Vinci,  Raphael,  Titian  and  Rembrandt  belongs  to 
this  phase  of  the  movement.  The  religious  side  of 
this  development  showed  itself  in  the  Protestant 
Reformation  with  Martin  Luther  as  the  central 
figure,  while  the  political  expression  was  reflected 
in  the  growth  of  nationality.     As  has  been  stated, 


COMMERCIAL    POLICIES 

the  Crusades  hastened  the  downfall  of  feudalism 
by  enlisting  the  services  of  the  feudal  barons  many 
of  whom  lost  their  lives  in  the  expeditions  or  re- 
turned with  empty  purses.  Their  power  at  first 
largely  monopolized  by  the  rich  burghers  of  the 
cities  was  gradually  taken  over  by  the  central  gov- 
ernments. States  like  Spain,  France  and  England 
became  nations  in  the  modern  sense.  Finally  the 
commercial  phase  was  characterized  by  three  far- 
reaching  events — the  discovery  of  America  by 
Columbus  (1492),  the  finding  of  an  all-water  route 
to  the  Indies  via  the  Cape  of  Good  Hope  by  Vasca 
da  Gama  (1498)  and  the  circumnavigation  of  the 
globe  by  Magellan  and  his  followers  (1519-1522). 
These  discoveries  changed  the  great  trade  routes 
between  the  East  and  the  West,  which  the  Turks 
by  their  conquests  culminating  in  the  capture  of 
Constantinople  (1453)  had  greatly  interfered  with, 
and  shifted  the  great  commercial  centres  of  Europe 
from  the  Mediterranean  to  the  Atlantic  shores. 
They  brought  into  general  use  many  new  products 
such  as  tobacco,  potatoes  and  Indian  corn,  and  in- 
creased enormously  the  supply  of  the  precious 
metals.  They  also  cheapened  transportation  by 
substituting  ocean  trade  for  commerce  which  was 
largely  over-land  or  confined  to  inland  seas.  Finally 
they  gave  added  importance  to  the  industrial  and 
commercial  classes  and  led  to  two  hundred  years  of 
warfare  for  commercial  supremacy.  The  entire 
general  movement  wa-s  powerfully  aided  by  three 
important  inventions — those  of  gunpowder,  the 
printing  press  and  the  mariner's  compass. 

22 


THE    MERCANTILE     SYSTEM 

12.  General  Characteristics  of  Mercantilism. — 
The  changes  which  characterize  the  beginnings  of 
modern  history  brought  about  important  modifica- 
tions in  economic  thought  and  action.  Mercantihsm 
is  the  term  used  to  designate  this  general  movement. 
It  represented  an  effort  to  theorize  and  legislate 
along  national  rather  than  local  or  municipal  lines. 
Both  theoretically  and  practically  it  was  intensively 
protective  and  derived  much  inspiration  from  the 
city  economic  poHcy  of  the  Middle  Ages.  While 
mercantilism  possessed  no  universal  theorems  or 
regulations,  it  did  have  several  more  or  less  general 
characteristics,  one  of  the  most  prominent  of  which 
was  its  over-estimation  of  the  importance  of  money. 
This  is  easy  to  understand.  The  precious  metals 
had  been  drained  off  to  the  East  during  preceding 
centuries  in  payment  for  Eastern  articles  of  trade, 
especially  since  the  period  of  the  Crusades.  This 
was  contemporaneous  with  an  enormously  growing 
demand  for  money  payments  for  large  standing 
armies,  expensive  courts  and  salaried  officials. 
The  practical  economic  problem  was  how  to  meet 
these  increasing  expenses.  Not  to  meet  them 
meant  a  loss  of  sovereignty.  Under  such  condi- 
tions and  at  a  time  when  the  principles  of  political 
economy  were  poorly  understood  it  was  natural  for 
economic  writers  and  statesmen  to  reason  that  the 
wealth  of  a  country  was  largely  in  proportion  to  the 
amount  of  the  precious  metals  in  its  possession. 
Fortunate  was  the  country  possessing  gold  and 
silver  mines,  but  as  none  of  the  more  advanced 
countries   of  Western    Europe   were  thus   favored 

23 


COMMERCIAL    POLICIES 

foreign  trade  must  be  resorted  to  in  order  to  obtain 
the  necessary  supplies.  This  led  to  another  im- 
portant characteristic  of  mercantilism — an  over- 
estimation  of  the  value  of  foreign  as  compared  vi^ith 
the  value  of  domestic  commerce. 

13.  First  and  Second  Phases  of  Mercantilism. — 
When  nations  succeeded  in  obtaining  the  precious 
metals  the  problem  w^as  how  to  keep  them  from 
leaving  the  country.  This  led  to  strenuous  govern- 
mental activity.  Cossa,  the  Italian  economist,  dis- 
tinguishes three  phases  of  mercantilism,  all  of  them 
being  characterized  by  governmental  efforts  to 
maintain  or  increase  the  nation's  supply  of  gold 
and  silver.  The  characteristics  of  the  first  and 
earliest  phase  of  mercantilism  were  prohibition  of 
specie  exportation,  debasement  of  coinage  and  de- 
termination by  law  of  the  course  of  exchange. 
Many  nations  resorted  to  such  measures,  especially 
Spain  and  Portugal,  but  their  inutility  was  early 
demonstrated.  The  second  phase  of  the  Mercantile 
System,  the  so-called  "Balance  of  Bargains,"  found 
its  fullest  play  in  England.  This  scheme  "was  in 
effect  a  complex  mass  of  provisions  minutely  regu- 
lating individual  contracts  between  English  and 
foreign  traders  with  a  view  to  making  them  a 
source  of  increase  to  the  volume  of  coin  circulating 
at  home.  Of  course  the  usual  prohibition  of  specie 
exports  was  a  part  of  the  scheme  which  further 
regulated  the  proceedings  of  English  merchants 
selling  at  'staple  towns'  such  as  Bruges,  Antwerp 
and  Calais  in  particular.  They  were  bound  by 
law  to  bring  back  in  cash  from  these  places,  which 

24 


THE    MERCANTILE     SYSTEM 

as  staple  towns  enjoyed  a  monopoly  of  the  export 
trade  in  manufactured  goods,  a  fixed  proportion  of 
the  prices  paid  them  by  aliens.  Furthermore,  there 
were  the  'statutes  of  employment'  which  required 
alien  traders  selling  goods  in  England  to  invest  the 
money  in  English  produce.  To  guarantee  the  exact 
observance  of  these  minute  prescriptions,  traders 
were  subjected  to  a  special  supervision  by  officers 
of  finance,  called  Customers,  upon  whom  devolved 
the  collection  of  tariff  dues  in  staple  towns.  This 
collection  involved  intervention  on  the  part  of  still 
another  public  officer,  called  the  Royal  Exchanger, 
who  exchanged  foreign  coins  intrusted  to  the 
Customers  for  coin  of  the  English  realm." 

14.  Third  Phase  of  Mercantilism  (The  Balance 
of  Trade.) — The  practical  application  of  the  prin- 
ciples held  by  the  earlier  Mercantilists  proved  a 
hindrance  to  trade.  Modifications  were  advocated 
especially  by  English  writers  who  asserted  that  it 
was  not  the  individual  but  the  aggregate  or  national 
balance  which  was  the  important  thing.  "Only 
one  thing  really  enriches  the  state  and  that  is  such 
a  shaping  of  complex  commercial  transactions  as 
shall  secure  that  the  value  of  all  imports  shall  be 
less  than  that  of  all  exports."  In  this  case  there 
would  be  a  balance  payable  in  money.  Such  a 
balance  became  known  as  a  "favorable  balance  of 
trade,"  while  on  the  other  hand,  if  the  total  value 
of  a  country's  imports  exceeded  the  total  value  of 
its  exports  so  that  a  nation  must  pay  a  money 
balance,  such  a  condition  was  designated  an  "un- 
favorable balance  of  trade."     The  task  of  the  law- 

25 


COMMERCIAL    POLICIES 

making  power  was  to  create  a  "favorable  balance 
of  trade"  and  in  the  carrying  out  of  this  policy 
certain  general  tenets  were  more  or  less  adhered  to. 
In  the  first  place  it  was  held  that  foreign  commerce 
was  most  profitable  when  exchange  of  domestic 
and  foreign  products  was  by  means  of  native  ships 
and  sailors.  The  most  noteworthy  legislation  in 
this  respect  was  the  English  Navigation  acts  of 
the  seventeenth  century.  Domestic  manufactures 
were  especially  favored  and  their  importation  as 
well  as  the  exportation  of  raw  materials  were  often 
discouraged  or  even  prohibited,  while  on  the  other 
hand  their  exportation  and  the  importation  of  raw 
materials  were  facilitated.  The  principal  reasons 
which  led  the  Mercantilists  to  regard  domestic 
manufactures  with  such  favor  were  two-fold — ex- 
ports of  manufactures  represented  proportionately 
greater  values  than  the  exports  of  raw  materials, 
and  therefore  tended  to  create  a  favorable  balance 
of  trade ;  they  also  gave  greater  employment  to 
labor  and  made  a  denser  population  possible — a 
condition  deemed  very  desirable  by  the  Alercan- 
tilists.  Holding,  as  they  did,  the  view  that  the 
advantages  of  trade  were  largely  one-sided  and 
accrued  especially  to  those  nations  which  could  sell 
more  than  they  bought,  it  was  natural  that  the 
Mercantilists  should  strive  to  exercise  political 
power  over  other  countries  in  order  to  control  more 
effectively  the  course  of  their  trade. 

This  struggle  led  to  a  colonial  policy  of  exploita- 
tion— based  upon  the  principle  that  the  purpose  of 
colonies  was  to  enrich  the  mother  land,  especially 

26 


THE    MERCANTILE    SYSTEM 

as  suppliers  of  raw  materials  and  as  purchasers  of 
of  manufactured  products.  While  mercantilism  as 
a  foreign  policy  was  especially  emphasized  it  was 
also  a  domestic  policy.  In  its  latter  capacity  it  had 
to  do  with  the  creation  and  maintenance  of  eflfective 
peace  conditions  which  had  been  impossible  under 
the  feudal  system,  with  the  supplanting  of  city 
monopolies  by  state  monopolies,  with  the  abolition 
or  diminution  of  inland  tolls,  taxes  and  other  local 
restrictions  and  in  general  with  all  those  regulations 
calculated  to  unify  on  a  national  rather  than  on  a 
municipal  basis  all  internal  economic  matters. 

15.  Criticism  of  Mercantilism. —  One  of  the  best 
brief  criticisms  of  mercantilism  is  given  by  Cossa. 
"Theoretically  viewed,"  he  says,  "mercantilism,  in 
its  doctrines  about  the  balance  of  trade  and  the 
functions  of  customs  duties,  is  the  first  regular  at- 
tempt at  explaining  the  phenomena  of  the  circula- 
tion of  wealth,  and  being  the  first  it  was  not  the 
best,  but  necessarily  had  its  imperfections.  Pro- 
duction was  not  clearly  understood  in  those  days, 
because  capital  had  never  been  defined  and  was  still 
confused  with  money,  money  being  the  most  ob- 
vious and  permanent  shape  which  accumulated 
wealth  assumed.  Undoubtedly  the  mercantilists 
grossly  exaggerated  the  importance  of  money,  not 
considering  that  its  function  was  purely  instru- 
mental; not  all  of  them  grasped  the  rudimentary 
fact  that  without  selling  there  could  be  no  buying; 
many  of  them  were  at  pains  to  invent  means  which 
accomplished  just  what  they  never  dreamed  of. 
Money  they  considered  to  be  merchandise,  but  a 

27 


COMMERCIAL    POLICIES 

merchandise  srii  generis,  and  here  they  were  right. 
They  were  also  right  in  deploring  the  evils  of 
poverty,  but  their  remedy  was  ill  considered,  since 
it  is  possible  to  have  too  much  even  of  such  a  good 
thing  as  money.  Its  excessive  abundance  raises 
prices  and  stops  exportation.  They  could  appre- 
ciate the  value  of  money  in  mass,  but  not  of  money 
in  movement.  They  could  not  see  that  it  was  just 
as  important  to  have  it  circulate  freely  and  quickly 
as  to  have  much  of  it.  They  considered  that  the 
balance  of  trade  and  the  balance  of  debits  and 
credits  were  convertible;  and  it  therefore  never 
dawned  upon  them  that  a  nation  might  go  on  for  a 
long  time  importing  goods  of  greater  value  than 
those  it  exported  without  the  least  danger  of  ex- 
hausting its  store  of  the  precious  metals  in  the 
process.  Their  impenetrability  in  this  respect  re- 
sulted from  their  not  being  aware  that  a  large  pro- 
portion of  payments  is  made,  not  in  money  but  in 
merchandise,  and  from  their  ignoring  the  material 
circumstance  that  an  excess  in  value  of  imports 
over  exports  is  often  covered  by  drafts  upon  for- 
eign ports  for  amounts  there  due  to  the  importing 
country.  Again,  the  Mercantilists  were  totally  at 
sea  with  their  chimerical  notion  that  a  balance 
favorable  to  a  given  country  could  be  maintained 
continuously  at  every  given  moment.  Furthermore, 
they  never  made  room  in  their  minds  for  the  least 
comprehension  of  what  a  gross  self-deception 
lurked  in  the  so-called  principle  of  reciprocity  upon 
which  commercial  treaties  were  so  constantly  based. 
Their  mental  processes  could  not  cope  with  the  fact 

28 


THE    MERCANTILE    SYSTEM 

that  a  country  which  refuses  admission  to  foreign 
goods,  on  the  plea  that  the  foreigner  shuts  out  its 
own,  occupies  the  ridiculous  position  of  a  man  who 
declines  something  that  he  needs  because  his  neigh- 
bors are  treating  themselves  in  the  same  shabby 
manner. 

"The  Mercantilists  did  not  perceive  that  nations 
as  well  as  individuals  grow  rich  in  one  way,  and 
one  way  only, — by  producing  more  than  they  con- 
sume,— chiefly  because  external  commerce  and 
manufactures,  being  of  course  the  chief  source  of 
wealth,  engrossed  their  whole  attention.  Hence 
their  doctrine  that  exports  must  exceed  im- 
ports, which  involved  the  absurd  identification  of 
the  interests  of  the  nation  at  large  with  those  of  one 
class  only,  the  trading  class.  This  monstrous  error 
bore  its  fatal  fruit  in  rivalries  and  wars  between 
England,  France  and  Holland,  each  belaboring  the 
other  two  with  tariff  assaults  and  reprisals,  each 
bent  on  economic  primacy." 

A  proper  understanding  of  the  development  of 
commerce  during  the  sixteenth,  seventeenth  and 
eighteenth  centuries  is  impossible  without  an  intel- 
ligent appreciation  of  the  general  principles  of  mer- 
cantilism. During  this  period  these  principles 
guided  the  economic  policy  of  Western  European 
countries  and  each  in  turn  played  an  important 
role  in  the  contest  for  commercial  supremacy. 
First  Portugal,  then  Spain,  followed  by  the  Nether- 
lands, France  and  England. 

1 6.  Portugal  and  Spain. —  Portuguese  were  the 
first  people  in  Modern  Europe  to  make  long  voyages 

29 


COMMERCIAL    POLICIES 

and  important  discoveries,  which  were  begun  in 
the  early  part  of  the  fifteenth  century  under  Henry 
the  Navigator.  India  was  reached  by  Vasca  da 
Gama  in  1498,  and  in  1500  the  Portuguese  took 
possession  of  Brazil.  Her  power  was  overshad- 
owed by  Spain  which  became  a  united  kingdom  in 
the  latter  part  of  the  fifteenth  century  and  under 
Charles  V.,  by  means  of  successful  wars,  brilliant 
discoveries  and  fortunate  marriages,  her  empire 
comprised  most  of  western  continental  Europe  ex- 
cepting France  and  also  embraced  a  large  part  of 
the  New  World  and  important  colonies  in  the  East. 
For  a  period  of  about  half  a  century  Spain  enjoyed 
a  great  industrial  awakening,  but  in  spite  of  a 
strenuous  application  of  the  principles  characteristic 
of  die  earlier  stages  of  mercantilism  large  cjuantities 
of  her  precious  metals  left  the  country.  The  abun- 
dance of  these  metals  had  caused  a  depreciation  in 
their  value  as  reflected  in  the  rise  of  prices  and 
large  quantities  of  manufactured  goods  were  im- 
ported. The  search  for  gold  in  the  New  World 
had  developed  the  spirit  of  adventure  and  had 
crippled  the  industrial  life  of  the  people.  The  suc- 
cessful revolt  of  the  Netherlands  and  unfortunate 
wars  with  England  and  France  deprived  her  of 
many  of  her  important  possessions  and  left  her 
loaded  with  debts.  Spain  ceased  playing  a  leading 
role  in  European  commercial  politics  after  the  mid- 
dle of  the  seventeenth  century. 

17.  The  Netherlands. —  The  inhabitants  of  the 
Netherlands — the  countries  now  known  as  Belgium 
and    Holland — had    been    very    industrious    people 

30 


THE    MERCANTILE     SYSTEM 

for  centuries.  Flanders  (Modern  Belgium  and  the 
Northeastern  part  of  France)  furnished  the  world 
with  many  manufactures,  especially  woolen  tex- 
tiles, and  her  workmen  taught  Western  Europe 
many  industrial  arts.  Bruges  was  for  a  long  time 
the  leading  city,  but  later  Antwerp  became  the  great 
emporium  for  Northern  Europe.  War  against 
Philip  II.,  who  attempted  to  wipe  out  Protestantism 
in  the  Netherlands,  was  disastrous  to  Antwerp. 
Her  most  energetic  burghers  emigrated  and  settled 
largely  in  the  northern  provinces  (Holland).  After 
Spain  had  lost  her  naval  supremacy  to  England  by 
the  destruction  of  the  Spanish  Armada  (1588), 
Holland  attempted  to  develop  her  East  India  trade 
by  sending  out  several  expeditions.  Smaller  com- 
panies were  united  into  the  Dutch  East  India  Com- 
pany in  1602  with  a  state  charter  granting  it  a 
complete  monopoly  of  East  Indian  commerce.  In 
a  few  years  many  of  the  best  possessions  of  the 
Portuguese  and  English  in  the  East  came  under  its 
control.  In  1621  the  Dutch  West  India  Company 
was  chartered  to  carry  on  trade  along  the  west 
coast  of  Africa  and  in  the  New  World.  Its  most 
important  settlement  was  at  New  Amsterdam  (now 
New  York).  The  success  of  this  company  was  not 
marked.  The  independence  of  the  Netherlands 
was  recognized  by  the  Peace  of  Westphalia  in  1648. 
At  that  time  she  was  the  first  commercial  power  of 
Europe  with  her  trade  centered  at  Amsterdam. 
The  Dutch  did  not  long  maintain  their  supremacy. 
jNIuch  of  their  trade  was  diverted  to  English  ships 
by  the  English  navigation  acts  and  by  their  naval 

31 


COMMERCIAL    POLICIES 

defeat  at  the  hands  of  the  EngHsh  in  1672.  The 
Dutch  also  suffered  in  warfare  with  other  powers 
and  from  internal  dissensions. 

18.  France. —  The  great  discoveries  were  at  first 
unfavorable  to  the  growth  of  French  commerce 
because,  by  changing  the  routes  of  trade,  they  cut 
off  much  of  her  overland  traffic  between  Northern 
and  Southern  Europe.  The  great  French  fairs 
and  the  port  of  Marseilles  were  most  disadvan- 
tageously  affected.  The  great  wars  during  the 
sixteenth  century  also  handicapped  the  growth  of 
French  commerce.  During  the  one  hundred  years 
following  the  latter  part  of  the  sixteenth  century, 
however,  France  made  great  industrial  and  com- 
mercial strides  largely  because  of  the  energy  of  her 
great  statesmen — Sully,  Richelieu,  Mazarin,  and 
especially  Colbert.  This  is  the  classic  period  of 
mercantilism  and  the  name  of  Colbert  has  been  so 
prominently  associated  with  this  system  that  many 
have  given  it  the  name  of  Colbertism.  Mercantil- 
ism as  a  domestic  policy  was  especially  prominent 
in  the  measures  enacted  by  this  great  statesman. 
The  immigration  of  skilled  craftsmen  and  the 
formation  of  new  industries  were  encouraged.  The 
aim  was  industrial  self-sufhciency  and  this  was  in 
a  measure  realized  by  the  removal  of  inland  tolls 
and  the  enactment  of  a  national  customs  tariff. 
Taxation  was  lowered  and  equalized,  canals  and 
bridges  built,  the  navy  subsidized  and  the  transit 
trade  encouraged.  Commercial  companies  were  or- 
ganized after  the  plan  of  the  English  and  Dutch 
companies  and  colonies  were  established  in  all  parts 


THE     MERCANTILE     SYSTEM 

of  the  world,  especially  in  North  America  and  in 
India.  At  the  time  of  the  death  of  Colbert  (1683) 
France  was  the  foremost  commercial  and  political 
power  in  Europe.  Then  followed  several  decades 
of  expensive  wars,  costly  courts,  unjust  taxation 
and  religious  intolerance  under  Louis  XIV.  from 
which  France  never  recovered.  In  her  struggle 
with  the  English  for  commercial  supremacy  during 
the  eighteenth  century  she  lost  most  of  her  colonies, 
including  Canada,  which  was  surrendered  to  Eng- 
land at  the  close  of  the  Seven  Years  (French  and 
Indian)  war  in  1763. 

19.  England. —  England's  industrial  condition 
was  primitive  until  about  the  fifteenth  century. 
She  exported  raw  materials,  especially  wool  and 
minerals,  and  imported  manufactures.  Her  com- 
merce and  navigation  were  largely  controlled  by 
foreigners,  especially  Jewish,  Dutch  and  Hanseatic 
merchants.  Her  industrial  development  began  to 
be  more  active  in  the  fifteenth  century.  She  en- 
gaged energetically  in  foreign  trade,  made  im- 
portant maritime  discoveries  and  settlements  in 
both  hemispheres  and  organized  important  trading 
companies,  the  most  famous  being  the  East  India 
Company  (1600),  after  which  Dutch,  French  and 
other  trading  companies  were  largely  modelled. 
England's  industrial  and  commercial  progress  was 
checked  during  the  first  half  of  the  seventeenth  cen- 
tury by  the  civil  and  religious  wars  under  the 
Stuarts,  but  during  the  century  following  her  com- 
mercial and  industrial  expansion  was  continuous. 
Mercantilism  held  full  sway  and  found  expression 
3  33 


COMMERCIAL    POLICIES 

in  laws  encouraging  the  growth  of  home  manu- 
factures by  means  of  customs  duties  or  import  pro- 
hibitions and  in  inducements  offered  skilled  workmen 
to  settle  in  England.  The  principal  aim  of  Eng- 
land's foreign  commercial  policy  was  to  make  her 
merchant  marine  the  carrying  power  of  the  world. 
The  most  important  legislation  which  aimed  to 
realize  this  is  found  in  the  navigation  acts  passed 
in  the  middle  of  the  seventeenth  century  already 
referred  to.  The  international  commercial  rivalry 
culminating  in  the  latter  part  of  the  eighteenth  cen- 
tury resulted  in  England's  becoming  the  virtual 
dictator  on  the  high  seas  and  the  possessor  of  im- 
portant colonies  in  all  parts  of  the  world.  Her 
vast  colonial  empire,  founded  upon  the  mercantile 
idea  that  the  purpose  of  colonies  was  to  enrich  the 
mother  country  v/ith  little  regard  to  the  interests 
of  the  colonies,  was  more  or  less  shattered  when 
subjected  to  the  changed  economic  conditions  and 
political  ideals  at  the  close  of  the  eighteenth  century. 

BIBLIOGRAPHY 

C.  (a)  Dictionaries  and  Encyclopaedias  (Conrad's 
Handw.  der  Staatsw.,  Elster's  Worterb.  der  Volksw.,  La- 
lor's  Cyclop.,  New  Inter.  Encyc,  Palg.  Diet.)  (b)  Econo- 
mics, All  texts  on  (especially  Cossa,  pp.  193-210,  List,  Bk. 
III.,  Ch.  II.,  A.  Smith,  Bk.  IV.,  CIi.  i,  3,  &  8).  (c) 
English  Indus.  Histories,  Ch.  I.  (d)  Histories  of  Polit- 
ical Economy  or  of  Economic  Doctrines  (Blanqui  Ch. 
XXIV-XXIX,  Damaschke,  Espinas,  *Ingram,  Ch.  IV., 
Rambaud)  ;    (e)   Histories  of  special  countries. 

D.  Acton,  Lord.  Cambridge  Mod.  Hist.,  Vol.  I.; 
Bastable's  Com.  of  Nations,  Ch.  IV;  Child's  Brief  Ob- 
servations;  *Cunningham's   Growth,  etc.     (Modern  Times 

34 


THE    MERCANTILE     SYSTEM 

Part  I.  Mercantile  System)  ;  Day's  Hist,  of  Com.,  Ch. 
XVni.  et  fol.  ch. ;  Ehrenberg's  Hamburg  and  England; 
Grunzel's  Handelsp.,  pp.  307-322 ;  Held's  Carey's  Socialw. ; 
Hewens  England's  Trade,  etc. ;  Locke's  Some  Observa- 
tions; *Mim's  Eng.  Treasure;  North's  Discourses;  Petty's 
Pol.  Surveys ;  *Sargent's  Econ.  Pol.  of  Colbert ;  Schauz' 
Eng.  Handelsp ;  *Schmoller's  Mercantile  System ;  See- 
ley's  Exp.  of  Eng.,  Ch.  IV. 

E.  Dilke,  Lady,  France  under  Colbert,  Fortn.  XLV., 
204,  1886;  Keller,  A.  G.,  Portuguese  Colonization  in  Brazil, 
Yale  R.,  Feb.,  '06;  Moses,  B.,  Econ.  Condition  of  Spain 
in  Sixteenth  Cent.  9.  Pol.  Econ.  I.,  pp.  513-534. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  How  did  the  invention  of  gunpowder,  the  compass 
and  the  printing  press  influence  commercial   development? 

2.  What  other  products  besides  Indian  corn,  tobacco  and 
potatoes  came  into  new  or  more  general  use  after  the  great 
discoveries? 

3.  Make  an  outline  of  the  most  characteristic  mercan- 
tile legislation  during  the  Sixteenth,  Seventeenth  and 
Eighteenth  centuries  in  any  one  of  the  following  coun- 
tries :  Portugal,  Spain,  Netherlands,  France,  Germany, 
England.  (Consult  general  and  special  political  and  in- 
dustrial histories). 

4.  Can  you  recall  the  names  of  any  early  American  ex- 
plorers who  searched  primarily  for  gold?  Had  their  de- 
sire for  gold  any  connection  with  mercantilism? 

5.  What  was  the  Edict  of  Nantes  and  what  were  the 
economic  efifects  of  its  revocation  in  1865? 

6.  Why  is  religious  intolerance  unfavorable  to  the  de- 
velopment of  commerce  and  industry?     Give  examples. 

7.  Can  you  give  any  illustrations  to  show  the  preval- 
ence of  local  restrictions  in  western  Europe  during  the 
period  of  mercantilism.  (Consult  special  histories;  see  al- 
so "The  Story  of  a  Peasant"  by  Erkmann-Chatrian,  Pt.  I., 
Ch.  2  and  5). 

8.  Are  there  any  examples  of  such  restrictions  in  early 

35 


COM^IERCIAL     POLICIES 

American  hibtory?     (Indus.  Hist,   of  U.   S.,  Bogart;   also 
Coman;  Fiske's  Crit.  Period  of  Amer.  Hist.) 

9.  Are  you  a  mercanlilist?  Would  you  be  a  mercan- 
tilist were  you  living  in  Western  Europe  two  hundred 
years  ago? 

10.  What  is  socialism?  Is  there  any  connection  be- 
tween socialism  and  mercantilism?  (See  art.  "Socialism" 
in  Palg.  Diet). 


36 


CHAPTER    III. 

DEVELOPMENT    OF   MODERN    COMMERCIAL 
POLITICS:   FREE   TRADE 

20.  Political  and  Economic  Revolt  Against 
Mercantilism. —  From  the  foregoing  chapter  it  is 
clear  that  mercantilism  was  the  economic  expres- 
sion of  an  effort  to  offset  the  decentralizing  tend- 
encies characteristic  of  the  Middle  Ages.  The 
conditions  which  characterized  the  beginnings  of 
the  modern  period  demanded  strenuous  state  activity 
along  national  lines,  but  in  proportion  as  effective 
political  and  economic  nationality  was  realized  the 
need  of  governmental  activity  of  the  mercantilistic 
variety  lessened  and  the  accumulated  network  of 
antiquated  regulations  tended  to  retard  commercial 
and  industrial  expansion.  A  political  and  economic 
reaction  arose  both  in  England  and  on  the  Conti- 
nent during  the  eighteenth  century.  The  political 
reaction  received  its  inspiration  from  English  phil- 
osophers, especially  John  Locke,  was  popularized 
by  French  writers,  especially  Rousseau  and  Vol- 
taire, and  received  its  classical  expression  in 
America  and  France — in  the  former  country  in  the 
Declaration  of  Independence  wherein  it  is  stated 
"that  all  men  are  created  equal ;  that  they  are  en- 
dowed by  their  creator  with  certain  unalienable 
rights ;  that  among  these  are  life,  liberty  and  the 

37 


COMMERCIAL    POLICIES 

pursuit  of  happiness," — in  the  latter  country  under 
the  banner  of  the  great  Revolution  of  1789 — "lib- 
erty, equality,  and  fraternity."  The  economic  re- 
action which  was  centered  in  France  received  the 
name  of  the  Physiocratic  System,  while  a  similar 
movement,  centered  in  England,  became  known  as 
the  Free  Trade  System. 

21.  The  Physiocratic  System. —  The  founder 
of  this  system  was  the  French  economist,  Quesnay, 
while  Turgot,  the  French  statesman,  was  its  most 
brilliant  expositor.  There  were  two  distinct  ideas 
of  this  school,  both  being  opposed  to  mercan- 
tilism. In  the  first  place  the  Physiocrats  believed 
in  the  superiority  of  agriculture  over  commerce  and 
industry.  They  regarded  agriculture  as  the  only 
source  of  increments  of  wealth  because  it  alone 
produced  a  "net  product,"  that  is,  an  excess  over 
the  cost  of  production.  Farmers  and  land  owners 
alone  were  productive ;  all  other  classes  were  un- 
productive or  "sterile."  In  the  second  place  the 
Physiocrats  held  to  the  belief  in  a  natural  order  of 
society  and  thought  it  useless  to  devise  laws  and 
regulations.  They  proclaimed  the  doctrine  that 
things  should  be  let  alone  (laissez-faire,  laisses- 
passer).  The  first  of  these  principles  was  an  ex- 
aggeration and  did  not  long  survive  as  an  important 
economic  doctrine.  The  second  principle,  however, 
became  dominant  in  political  economy  for  nearly  a 
century.  Although  the  Physiocrats  had  many 
gifted  adherents  they  never  obtained  a  popular  hold 
even  in  France  itself. 

22.  The  Free  Trade  System.— In  England  where 

38 


FREE    TRADE 

commerce  and  industry  were  more  important  eco- 
nomic factors  than  on  the  Continent  the  reaction 
against  the  restrictive  system  took  a  somewhat  dif- 
ferent form.  This  movement,  as  already  stated, 
became  known  by  the  name  of  Free  Trade.  Its 
most  important  forerunner  was  David  Hume,  but 
its  most  prominent  expositor  was  Adam  Smith. 
His  epoch-making  book,  "WeaUh  of  Nations," 
which  appeared  in  1776,  is  the  gospel  on  which 
modern  political  economy  is  based.  Smith's  entire 
work  is  pervaded  by  the  spirit  of  individualism. 
The  Mercantile  System  had,  he  claimed,  favored 
the  producer  at  the  expense  of  the  consumer.  Both 
should  be  cared  for.  He  agreed  in  the  main  with 
the  laissez-faire  principle  of  the  Physiocrats,  but  did 
not  agree  with  them  that  agriculture  alone  was  pro- 
ductive. He  emphasized  the  importance  of  com- 
merce and  industry.  Free  trade  was  a  necessary 
condition  of  economic  development  because  it  en- 
abled every  land  to  produce  those  things  which  it 
could  produce  at  least  cost.  He  refuted  the  idea 
of  the  Mercantilists  that  trade  is  not  mutually  ad- 
vantageous to  both  parties.  If  nations  or  individ- 
uals exchange  the  things  they  can  produce  at  least 
cost  for  other  goods  less  easily  produced,  society 
as  a  whole  gains  thereby.  Furthermore,  every  sane 
man  knows  his  own  interest  and  if  left  to  himself 
will  strive  to  maintain  or  better  his  economic  con- 
dition. His  prosperity  is  not  only  an  individual, 
but  also  a  social  gain. 

23.  England. — The  principle  of  non-interference 
in  trade  and  industry,  taught  in   the   "Wealth  of 

39 


COMMERCIAL    POLICIES 

Nations,"  was  quite  in  keeping  with  the  changed 
and  changing  economic  conditions  in  England  at 
the  close  of  the  eighteenth  and  the  beginning  of  the 
nineteenth  century.  England  lost  the  political  con- 
trol over  her  most  important  colonies  in  the  New 
World,  although  economic  dependence  was  largely 
retained.  A  movement  in  the  direction  of  laisses- 
faire  showed  itself  in  mollifying  changes  in  her 
colonial  policy,  in  the  tariff  reforms  inaugurated  by 
the  younger  Pitt  and  in  her  commercial  treaty  in 
1786  with  France.  This  movement,  however,  was 
very  much  disturbed  by  the  great  political  revolu- 
tion centered  in  France  and  the  great  industrial 
revolution  focused  in  England.  In  the  few  de- 
cades following  1760  English  industry  was  com- 
pletely revolutionized  by  a  series  of  remarkable 
inventions,  especially  in  the  textile  and  iron  manu- 
factures, as  well  as  in  the  general  application  of 
steam  to  industry  and  to  land  and  water  transporta- 
tion. Some  of  the  results  of  this  revolution  were 
the  supplanting  of  home  industry  by  the  factory 
system,  the  removal  of  restrictions  on  domestic 
industry,  such  as  those  regulating  wages  and  the 
price  of  commodities,  and  the  establishment  of  com- 
petition as  the  ruling  economic  principle.  England 
became  the  dominant  industrial  nation  of  the  world. 
The  French  Revolution  and  the  Napoleonic  wars 
(1789-1814)  favored  her  industrial  supremacy  by 
diverting  the  energies  of  the  people  on  the  Conti- 
nent from  peaceful  pursuits  and  by  making  com- 
merce and  navigation  more  profitable  than 
manufacturing  industry  to  the  great  neutral  nation 

40 


FREE    TRADE 

— the  United  States.  It  is  easy,  therefore,  to  un- 
derstand that  the  growing  manufacturing  interests 
of  Great  Britain  looked  with  favor  upon  the  policy 
of  free  trade  since  such  a  policy  would  tend  to 
cheapen  her  manufactures  and  thereby  strengthen 
her  industrial  supremacy,  both  at  home  and  abroad, 
by  permitting  the  free  importation  of  raw  materials 
used  either  directly  in  manufactures  or  indirectly 
as  food  for  the  working  classes.  The  first  modi- 
fication of  the  English  tariff  (generally  spoken  of 
as  a  change  of  the  "Corn  Laws,"  because  the  import 
duty  on  wheat  formed  the  centre  of  controversy) 
occurred  during  the  twenties  under  the  leadership 
of  Huskisson.  The  Anti-Corn  Law  League  was 
formed  in  1838  by  Richard  Cobden,  secretary  of 
the  chamber  of  commerce  at  Manchester,  and  under 
the  inspiration  of  its  leader,  carried  on  a  strenuous 
agitation  in  England  which  led  to  a  practical  repeal 
of  the  Corn  Laws  in  1846  under  the  premiership  of 
Peel.  The  finishing  touches  were  given  by  the 
repeal  of  the  Navigation  Laws  in  1849,  the  Coast- 
wise Navigation  Law  in  1854,  the  negotiation  of 
the  commercial  treaty,  known  as  the  Cobden  treaty, 
between  England  and  France  in  i860,  and  later 
legislation  during  the  first  premiership  of  Glad- 
stone (1868-1874).  Since  then  England  has  made 
practically  no  use  of  customs  duties  excepting  those 
of  a  purely  revenue  character. 

24.  The  United  States. — Broadly  speaking,  the 
dominant  principle  in  American  commercial  politics 
up  to  the  period  of  the  Civil  War,  excepting  the 
period  from  about  181 5  to  1830,  was  laissez-faire. 

41 


COMAIERCIAL    POLICIES 

Early  protection  so  far  as  it  did  exist  referred  more 
to  navigation  than  to  industry.  There  were  at  first 
but  few  manufactures,  while  the  most  important 
interests  were  shipping  in  New  England  and  agri- 
culture in  the  Middle  and  Southern  states.  As  the 
only  important  neutral  nation  during  the  Napoleonic 
wars,  the  United  States  became  the  great  carrier 
nation  of  the  world,  but  when  the  British  Orders 
in  Council  and  Napoleon's  Berlin  and  Milan  decrees 
drove  American  ships  into  American  ports,  and 
Jefferson's  Embargo  and  the  War  of  1812  detained 
them  there,  the  United  States  lost  her  supremacy 
on  the  high  seas.  Surplus  American  labor  and 
capital  were  diverted  from  commercial  into  agri- 
cultural and  industrial  pursuits.  The  agricultural 
development  expressed  itself  in  a  westward  move- 
ment of  the  population ;  the  industrial,  in  the  rapid 
growth  of  manufactures,  especially  of  the  textiles 
in  New  England.  The  effort  to  protect  the  latter 
from  the  ruinous  competition  of  British  manu- 
facturers gave  birth  to  the  first  era  of  industrial 
protection  in  the  United  States  from  about  181 5  to 
1830.  From  the  latter  date,  or  more  particularly, 
from  the  tariff  act  of  1833  to  the  Civil  War  (ex- 
cepting a  slight  temporary  reaction  from  1842  to 
1846),  the  characteristic  feature  of  the  American 
commercial  policy  was  a  tariff  whose  primary  pur- 
pose was  that  of  revenue. 

25.  Continental  Europe. —  The  economic  situa- 
tion in  Western  Continental  Europe  during  the  first 
sixty  years  of  the  nineteenth  century  differed  from 
the   conditions  both   in   the  United   States   and   in 

4^ 


FREE     TRADE 

England.  In  the  United  States,  broadly  speaking, 
the  free  trade  idea  was  generally  favored  by  all 
classes  excepting  in  the  decade  or  so  following  the 
close  of  the  War  of  1812.  In  England  it  found 
favor  among  the  industrial  and  commercial  classes, 
but  was  opposed  by  the  agriculturists.  On  the 
Continent  it  received  at  first  only  an  academic  ac- 
ceptance. The  Napoleonic  wars  had  left  European 
governments  in  a  state  of  bankruptcy.  Many  old 
and  new  industries,  which  had  been  stimulated  by 
the  restrictive  "Continental  System"  of  Napoleon, 
found  themselves  subjected  to  the  ruinous  competi- 
tion of  England  at  the  close  of  the  war.  The  effect 
on  the  Continent  was  similar  to  the  effect  in  the 
United  States — a  general  enhancement  of  customs 
duties.  This  was  especially  marked  in  some  coun- 
tries like  France,  while  the  movement  in  Germany 
was  more  moderate  and  culminated  in  1834  in  the 
formation  of  the  German  ZoUverein,  or  tariff  union, 
of  most  of  the  German  states.  Nevertheless,  the 
industrial  revolution  in  England  and  the  lowering 
of  her  import  duties  on  raw  materials,  tended  to 
enlist  the  continental  agrarian  classes  in  favor  of 
free  trade  since  they,  like  the  cotton  planters  in  the 
United  States,  wanted  no  restriction  on  their  sales 
of  agricultural  products  to  England  and  their  pur- 
chase of  English  manufactured  goods  in  return. 
Likewise  English  economic  theory  invaded  the 
Continent.  The  official  and  academic  classes  ac- 
cepted very  generally  the  doctrine  of  the  English 
school  of  political  economy  as  expounded  by  Smith 
and  his  followers  among  whom  Ricardo  and  Mill 

43 


COMMERCIAL    POLICIES 

were  the  most  conspicuous.  These  interests  com- 
bined with  the  efforts  of  the  agriculturists  and  of 
those  industrialists  who  had  little  to  fear  from  Eng- 
lish competition,  brought  about  a  reaction  in  the 
direction  of  free  trade  which  found  expression  in 
the  Cobden  commercial  treaty  between  England  and 
France  in  i860.  This  was  followed  by  similar 
treaties  negotiated  by  England  and  France  with 
other  European  countries.  These  treaties  provided 
for  a  marked  lowering  of  customs  duties  and  it  was 
presaged  by  many  that  the  "era  of  free  trade"  had 
become,  or  was  about  to  become,  the  universal 
policy.  Cobden  himself  seemed  to  have  no  doubt 
on  this  point,  for  after  signing  the  treaty  which 
bears  his  name  he  is  reported  to  have  said :  "You 
might  as  well  tell  me  the  sun  will  not  rise  tomorow 
as  tell  me  that  foreign  nations  will  not  adopt  Free 
Trade  in  less  than  ten  years  from  now."  The 
dream  of  the  free  traders  has  not  been  realized. 
In  less  than  ten  years  from  the  signing  of  the  treaty 
of  i860  there  were  signs  of  a  reaction  in  the  di- 
rection of  higher  duties. 

BIBLIOGRAPHY 

C.  "Free  Trade,"  "Laissez-Faire"  and  "Physiocrats" 
in  (a)  Dictionaries  and  Encyc.  (especially  *Palg.  Diet.)  ; 
(b)  **Economics,  Texts  on,  (Cairns,  Pt.  III.,  Ch.  IV., 
Cossa,  Ch.  VII.-VIII.,  Ricardo,  Sidgwick,  Ch.  V.,  Smith, 
Bk.  IV.,  et  al)  ;  (c)  Indus.  Histories  of  England  (see  Ch. 
L)  ;  (d)  ^Histories  of  Pol.  Economy,  Blanqui,  Ch.,  XXXII- 
XXXIV,  Cohn,  Ch.  III.-V.,  Ingram,  Ch.  V.;  (e)  Hist, 
of  various  countries  (especially  of  England)  ;  (f)  Poole's 
Index. 

D.  Armitage-Smith,  Free  Trade  movement;  Bastable's 


FREE    TRADE 

Theory  of  Inter-Trade;  *Bright's  Speeches;  *Cobden's 
Speeches ;  Cunningham's  Free  Trade  Movement ;  *Faw- 
cett's  Free  Trade;  Grunzel's  Handelsp,  pp.  222-332;  *Higg's 
Physiocrats;  Hume's  Essays,  Vol.  II.;  Levi's  Hist,  of 
Brit.  Com.;  *]Mongredien's  Hist,  of  Free  Trade;  Morley's 
Life  of  Cobden ;  Nicholson's  Hist,  of  Eng.  Corn  Laws ; 
Peel's  Speeches  (Hansard's  Debates  1842-1846)  ;  Ques- 
nay's  Tableau ;  Rand's  Econ.  Hist. ;  Seligman's  Shifting 
of  Inc.  Tax,  pp.  95-112;  Turgot's   Reflections. 

E.  Ashley,  W.  J.,  Tory  Origin  of  Free  Trade  Policy, 
Q.  J.  Econ.  Jl.,  1893;  Higgs,  H.,  Cantillon's  Place  in 
Economics  Q.  J.  Econ.  VI.  436,  1891-2;  Jevons,  W.  S., 
Cantillon  and  the  Nationality  of  Pol.  Econ.  Contemp. 
XXXIX.,  61,  1880;  Molesworth,  G.  L.,  Efifect  of  the  Corn 
Laws,  Nineteenth  Cent.  LIIL,  Mar.  1903 ;  Molesworth,  G. 
L.,  Real  Object  of  the  Corn  Laws,  Nineteenth  Cent.  D. 
1902;  Smith,  C.  E.,  Peel  and  his  Measures,  N.  Am.  R., 
LXXXV.,  442,  1857;  Smith,  G.,  Peel  and  Cobden,  Nine- 
teenth Cent.,  XL,  869,  1882. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  What  free  trade  arguments  were  used  by  the  fol- 
lowing English  statesmen?  Huskisson,  Peel,  Cobden  and 
Gladstone  (consult  parliamentary  debates;  also  edited 
works  of  the  above  statesmen)  ? 

2.  Do  economic  conditions  change  in  a  country?  Are 
we  justified  in  changing  our  opinions  on  economic  sub- 
jects when  conditions  change?  Are  we  justified  in  chang- 
ing such  opinions  when  conditions  have  not  changed? 

3.  Can  you  cite  any  great  statesmen  who  have 
changed  their  views  in  regard  to  the  tariflf?  Give  their 
reasons  for  so  changing?  (Consult  speeches  of  Webster, 
Calhoun,   Bismarck,   Chamberlain.) 

4.  What  is  the  position  of  the  democratic  party  in  the 
United  States  regarding  free  trade?  (Consult  platforms 
of  1896,  1900  and  1904). 

45 


COMMERCIAL    POLICIES 

5.  What  is  individualism?  Is  there  any  relation  be- 
tween individualism  and  free  trade? 

6.  In  what  sense  may  free  trade  in  England  be  said 
to  be  negative  protection? 

7.  Might  you  believe  in  the  theory  of  free  trade  and 
yet  be  a  protectionist?     Explain. 

8.  In  the  free  trade  and  protection  controversy  in  1889 
between  Gladstone  and  Blaine  what  arguments  were 
brought  out  by  the  former  in  favor  of  free  trade?  (N. 
Am.  R.,  CL.,  1889.) 

9.  What  has  the  term  "free  trade"  meant  at  different 
periods?  Bastable's  Theory  of  Inter.  Trade,  p.  128;  Selig- 
man,  p.  501 ;  see  also  "Free  Trade"  in  Palg.  Diet. 


46 


CHAPTER    IV. 

DEVELOPMENT  OF  MODERN  COMMERCIAL 
POLITICS:  PROTECTION 

26.  General  Character  of  Protection.— Protec- 
tion is  the  poHcy  of  encouraging  home  industries, 
usually  by  the  imposition  of  customs  duties  or  by 
bounties  paid  to  domestic  producers.  It  is  there- 
fore opposed  to  the  principle  of  free  trade.  It  is 
sometimes  characterized  as  a  return  to  mercantilism. 
Under  protection,  however,  export  duties  are  largely 
done  away  with,  while  prohibitions,  either  on  ex- 
ports or  on  imports,  are  the  exception  and  not  the 
rule.  The  level  of  duties  is  lower  than  under  mer- 
cantilism, and  discriminating  navigation  laws,  boun- 
ties, and  subsidies  are  less  frequently  employed. 
War,  often  resorted  to  under  mercantilism  in  order 
to  promote  or  repress  commerce,  is  now  less  often 
used  for  such  purposes.  More  peaceful  means  are 
at  hand.  Neutral  rights  are  more  respected  and 
great  advances  have  been  made  in  international 
law.  Better  means  of  transportation  and  communi- 
cation, improved  banking  facilities,  more  reliable 
statistical  information,  more  accurate  knowledge 
regarding  international,  political  and  economic  con- 
ditions, and  in  general  a  wider  and  better  under- 
standing and  appreciation  of  social  and  economic 
laws  make  mercantilism  an  impossibility. 

47 


COMMERCIAL    POLICIES 

27.  Causes  of  Recent  Growth  of  Protection. — 

The  growth  of  protection,  ahnost  universal  during 
the  past  few  decades,  is  explained  on  several 
grounds.  In  the  first  place  it  is  due  in  part  to  a 
general  reaction  against  the  purely  negative  char- 
acter of  English  political  economy.  This  reaction- 
ary movement  originated  in  Germany  about  the 
middle  of  the  last  century  and  its  advocates  became 
known  as  the  "historical  school."  It  differs  from 
the  "classical,"  or  free  trade  school,  by  interpreting 
the  complex  phenomena  of  industrial  life  in  the 
light  of  history  rather  than  by  deductions  based  on 
isolated  facts.  It  also  regards  the  state  as  an 
ethical  factor  and  as  an  organ  for  the  promotion 
of  all  social  aims  which  cannot  be  adequately 
realized  by  voluntary  individual  effort,  rather  than 
as  an  institution  whose  functions  were  merely  to 
protect  life  and  property.  In  other  words,  while 
the  classical  school  stands  for  individualism  and 
free  trade,  the  historical  school  represents  national 
and  protective  tendencies. 

The  second  factor  which  helps  to  explain  the  de- 
velopment of  protection  is  a  number  of  costly  wars 
during  the  sixties  and  seventies,  especially  the 
American  Civil  War  and  the  Franco-Prussian  con- 
flict. Wars  arouse  the  sentiment  of  nationality  and 
are  extremely  costly,  or  as  one  writer  expressed  it, 
"the  exigencies  of  finance  give  support  to  the  senti- 
ment of  protection."  In  times  of  war  all  forms  of 
taxes  are  submitted  to  with  little  opposition,  but 
upon  the  return  of  peace  when  tariff  reductions  are 
demanded  these  are  generally  made  along  the  lines 

48 


PROTECTION 

of  least  resistance,  that  is,  on  "unprotected  arti- 
cles," or  on  such  as  are  not  produced  at  home. 

Finally  the  recent  growth  of  protection  is  due, 
in  a  large  measure,  to  intense  international  compe- 
tition caused  by  greatly  improved  means  of  trans- 
portation and  communication  coupled  with  the 
enormous  industrial  development,  especially  in 
Western  Europe,  and  with  an  equally  prominent 
agricultural  development  in  the  central  part  of  the 
United  States,  in  Eastern  Europe,  in  Argentine  and 
in  other  parts  of  the  world.  Western  Europe  is 
deluging  the  rest  of  the  world  with  her  manufac- 
tured goods,  and  many  countries  which  are  attempt- 
ing to  develop  their  own  manufactures,  are  showing 
resentment  in  the  form  of  high  import  duties,  while 
the  agricultural  classes  of  Western  Europe  are 
showing  a  similar  resentment  against  the  influx  of 
agricultural  products  from  countries  which  are  in- 
dustrially less  advanced. 

28.  Main  Arguments  for  Protection.— England 
is  the  classic  land  of  free  trade,  not  only  because 
laissez-faire  finds  its  most  practical  application  in 
British  politics  of  the  first  part  of  the  nineteenth 
century,  but  also  because  British  writers — Smith, 
Ricardo,  Mill  and  others — are  among  its  best  ex- 
positors. Similarly  the  United  States  is  the  classic 
land  of  protection  because  the  policy  has  been  tried 
in  this  country  in  all  its  phases,  and  its  best  exposi- 
tion has  perhaps  been  given  by  American  writers — 
Hamilton,  Carey,  Patten  and  List.  The  last  named 
was,  of  course,  a  German  and  is  mentioned  here 
only  because  he  spent  several  years  of  exile  in  the 
4  49 


COM^'IERCIAL    POLICIES 

United  States  and  received  his  inspiration  in  part 
from  the  writings  of  Hamilton  and  from  the  eco- 
nomic policy  of  the  United  States,  for  his  residence 
in  this  country  (1825-30)  was  during  the  high 
water  mark  of  the  early  period  of  American  pro- 
tection. 

Various  arguments  have  been  advanced  from 
time  to  time  in  favor  of  protection.  The  national 
independence  argument,  based  upon  the  idea  that 
a  variety  of  industries  is  desirable  for  a  country  in 
order  to  make  a  nation  economically  independent, 
a  condition  especially  desirable  in  case  of  war,  and 
to  develop  its  spirit  of  nationality  was  the  keynote 
of  Hamilton's  argument.  It  was  advanced  at  a 
time  when  the  American  federal  government  had 
hardly  passed  the  experimental  stage,  and  the  de- 
velopment of  a  stronger  central  government  was 
of  the  greatest  necessity.  Hamilton's  argument 
was,  therefore,  more  essentially  political  than  eco- 
nomic. 

American  industries  that  had  sprung  up  during 
the  period  of  the  Embargo,  Non-intercourse  Act 
and  the  War  of  181 2  were  protected  by  the  tariff 
of  1816  and  by  later  tariffs  largely  on  the  ground 
that  they  were  infant  industries  and  needed  the 
temporary  fostering  care  of  the  government  in 
order  to  tide  over  domestic  disadvantages  in  pro- 
duction. The  infant  industry  argument  was  also 
the  keynote  to  List's  writings,  and  the  argument 
which  he  used  effectively  in  his  advocacy  of  a 
German  tariff  union,  or  Zollverein,  which  was 
formed,   as   previously  stated,  in    1834   and   which 

50 


PROTECTION 

became  the  economic  forerunner  of  German  political 
union. 

The  vested  interest  argument,  the  plea  that  it  is 
better  to  leave  well  enough  alone  and  not  disturb 
existing  vested  rights,  has  been  employed  probably 
in  every  customs  tariff  act  that  ever  came  into  the 
arena  of  discussion.  This  argument  is  especially 
prominent  at  the  present  time  in  the  United  States, 
and  its  advocates  are  generally  dubbed  "Stand- 
Patters." 

The  home  market  argument  was  especially  em- 
phasized by  Henry  Clay,  and  was  designed  to  per- 
suade the  new  agricultural  West  that  its  best 
markets  would  be  found  in  the  North  and  East  by 
fostering  the  manufacturing  interests  of  the  latter. 
This  argument  has  been  effectively  employed  since 
the  time  of  Clay  because  the  American  domestic 
market  has  become  the  greatest  market  in  the  world. 

Since  the  Civil  War  only  one  new  argument  of 
importance  in  favor  of  protection  has  become  promi- 
nent— the  so-called  pauper  labor  argument.  At  an 
earlier  period  in  American  history  it  used  to  be 
maintained  that  protection  was  necessary  because 
wages  were  high.  The  existence  of  high  wages  in 
the  United  States  handicapped  American  manu- 
factures and  protection  was  necessary  in  order  to 
equalize  this  disadvantage.  Now  the  argument  is 
inverted.  It  is  claimed  that  protection  causes  high 
wages  and  its  withdrawal  would  mean  the  pauper- 
ization of  American  labor  by  making  it  impossible 
for  manufacturers  to  pay  high  wages. 

29.  The  United  States,  1789-1887. — As  has  been 
51 


COMMERCIAL    POLICIES 

stated,  the  early  phases  of  American  protection  re- 
lated to  navigation  protection  inaugurated  in  1789, 
and  industrial  protection  which  followed  at  the 
close  of  the  War  of  181 2.  The  former  was  calcu- 
lated to  protect  the  shipping  interests  of  New  Eng- 
land, while  the  latter  sought  primarily  to  shield 
from  foreign  competition  the  manufacturing  inter- 
ests of  the  same  locality.  The  need  of  protection 
to  both  these  interests  lessened  in  the  latter  part  of 
the  twenties,  and  during  the  succeeding  thirty 
years  (excepting  a  slight  reaction  from  1842  to 
1846)  the  policy  of  the  United  States  was  essen- 
tially one  of  free  trade.  There  was  a  panic  in 
1857,  and  the  Civil  War  beginning  soon  after  led 
to  a  demand  for  enormous  revenues  which  was  met 
by  a  resort  to  a  comprehensive  system  of  both  im- 
port duties  and  internal  taxation.  The  war  de- 
veloped a  strong  sentiment  of  nationality  in  the 
North  and  this  was  intensified  by  the  hostile  attitude 
of  certain  European  interests  which  were  unfav- 
orably affected  by  the  struggle.  These  conditions, 
together  with  the  withdrawal  from  the  Union  of 
the  agricultural  South,  left  the  industrial  classes  of 
the  North  the  dominant  factor  in  American  politics. 
Then,  too,  in  the  years  following  the  War  the  coun- 
try was  too  much  engrossed  in  questions  of  recon- 
struction to  discuss  the  tariff.  The  result  was  that 
in  lessening  the  burdens  of  taxation  those  most  in- 
terested in  protection  succeeded  in  having  the  re- 
ductions made  in  internal  taxes  and  in  those  import 
duties  which  were  levied  on  articles  for  the  most 
part  not  produced   in   the  United    States.     In   the 

52 


PROTECTION 

early  seventies  after  the  disturbed  conditions  fol- 
lowing the  Civil  War  became  more  settled,  an 
agitation  for  tariff  reform  led  to  very  moderate 
reductions  in  the  tariff  act  of  1872,  but  owing  to 
the  panic  of  the  following  year  a  reaction  set  in 
which  found  expression  in  the  tariff  act  of  1875. 
A  return  of  prosperity,  however,  in  the  latter  part 
of  the  seventies,  owing  in  a  large  measure  to  good 
harvests  in  this  country  and  poor  harvests  in 
Europe,  caused  a  surplus  of  revenue  and  another 
agitation  for  tariff  reform.  This  led  to  the  appoint- 
ment of  a  tariff  commission  in  1882  and  a  new  tariff 
law  in  1883  with  moderate  reductions  based  largely 
upon  recommendations  made  by  the  commission. 

30.  The  United  States  1887-1897. —  The  slight 
reductions  in  the  act  of  1883  were  unsatisfactory 
to  the  advocates  of  freer  trade  and  the  tariff  issue 
was  forced  to  the  front  in  the  presidential  campaign 
of  1888  largely  because  of  Mr.  Cleveland's  annual 
message  of  the  preceding  year  which  was  devoted  en- 
tirely to  the  tariff  question.  He  committed  the  Demo- 
cratic party  to  a  policy  of  a  tariff  for  revenue,  and 
on  that  issue  the  Republicans  elected  Mr.  Harrison 
as  President.  They  interpreted  their  victory  as  an 
indorsement  of  the  policy  of  protection  and  passed 
the  tariff  act  of  1890,  known  as  the  McKinley  Bill, 
which  had  the  two-fold  purpose  of  reducing  the 
large  treasury  surplus  and  increasing  the  protective 
duties.  It  accomplished  both  these  results  in  a 
marked  degree.  As  regards  the  former,  it  was 
more  than  successful  because  of  very  liberal  appro- 
priations by  Congress  and  because  of  the  financial 

53 


COMMERCIAL    POLICIES 

panic  in  the  years  following  1892.  In  fact  it  created 
a  revenue  deficit.  As  regards  the  latter  it  may  be 
said  to  represent  the  high  water  mark  of  American 
protection.  The  country  showed  its  disapproval  by 
defeating  the  republican  candidate  and  electing 
Mr.  Cleveland  in  1892.  The  democratic  platform 
of  that  year  went  so  far  as  to  declare  a  protective 
policy  unconstitutional,  but  Mr.  Cleveland  and  the 
majority  of  his  party  certainly  did  not  represent 
such  a  radical  view.  In  fact  the  tariff  act  of  1894, 
known  as  the  Wilson-Gorham  bill,  not  only  did  not 
meet  the  views  of  the  radical  element  in  the  demo- 
cratic party,  but  was  equally  unsatisfactory  to  the 
more  moderate  element.  The  President  allowed  it 
to  become  a  law  without  his  signature.  The  aboli- 
tion of  the  duty  on  wool  seemed  to  be  about  the 
only  radical  feature  of  the  law.  Such  was  the  law 
under  a  democratic  president  and  with  the  Demo- 
crats in  a  majority  in  both  houses  of  Congress.  In 
1896  the  presidential  issues  were  primarily  the  silver 
question  and  secondarily  the  question  of  the  tariff. 
The  Republicans  succeeded  in  electing  as  President 
the  champion  of  protection,  Mr.  McKinley,  and  the 
first  thing  the  party  did  upon  coming  into  power 
was  to  pass  the  Dingley  tariff  act  of  1897.  From 
a  financial  standpoint  its  purpose  was  to  raise  rev- 
enue in  contrast  with  the  act  of  1890,  the  purpose 
of  which  was  to  reduce  it.  Both  acts  were  similar 
in  having  protection  as  a  main  purpose.  It  was 
thought  in  1890  that  the  acme  of  American  protec- 
tion had  been  reached,  but  the  act  of  1897  has  in 

54 


PROTECTION 

many  respects  far  outreached  the  law  of  1890  as  a 
protective  measure. 

31.  Present  Situation  in  the  United  States. — 

From  the  preceding  it  appears  that  theoretically  the 
Democratic  party  in  the  United  States  stands  for  a 
"tariff  for  revenue  only,"  and  that  the  Republican 
party  believes  in  the  policy  of  protection.  In  prac- 
tice, however,  it  does  not  appear  that  the  two  parties 
have  been  very  divergent  in  recent  years  since  the 
Democratic  party,  when  in  control  of  the  national 
government,  has  been  unable  to  enforce  any  radical 
departure  from  the  policy  of  protection.  The  ad- 
vocates of  protection  in  the  United  States  at  the 
present  time  may  be  divided  into  two  classes — one 
defending  protection  as  a  temporary  and  the  other 
as  a  permanent  policy.  The  former  is  claiming 
that  the  policy  has  accomplished  its  greatest  good 
in  building  up  American  industries  and  in  preserv- 
ing the  domestic  market  for  American  manufactur- 
ers, but  that  the  time  has  now  come  when  certain 
modifications  may  well  be  undertaken,  especially  by 
lowering  import  duties  on  raw  materials  and  on 
domestic  manufactures  controlled  by  the  trusts. 
They  also  emphasize  the  importance  of  lowering 
import  duties  in  order  to  facilitate  the  growing  ex- 
port trade,  especially  in  manufactured  goods. 
Those  who  oppose  this  view  especially  emphasize 
the  "vested  interest  argument,"  saying  that  the 
United  States  has  the  greatest  market  in  the  world, 
and  why  sacrifice  it  for  access  to  less  important 
fields ;  that  billions  of  capital  have  been  invested  in 
industries    which    would    be    jeopardized    by    tariff 

55 


COMMERCIAL    POLICIES 

modifications ;  and  that  we  are  immensely  pros- 
perous and  why  not  let  well  enough  alone? 

The  tariff  is  only  one  among  many  questions 
which  at  the  present  time  is  causing,  more  or  less 
unconsciousl}',  a  political  readjustment.  It  is  diffi- 
cult to  say  just  how  this  readjustment  will  take 
place,  but  it  is  apparent  that  a  large  element  in  each 
party  is  finding  political  sympathy  outside  the  ranks 
of  its  political  organization.  The  present  political 
situation  is  well  characterized  by  Lyman  Abbott  in 
a  recent  number  of  The  Outlook.  "Both  the  Re- 
publican and  Democratic  parties  are  divided,"  says 
Mr.  Abbott,  "into  two  hostile  wings.  These  wings 
are  kept  close  together  less  by  coherence  in  prin- 
ciple than  by  personal  fellowship  and  a  common 
tradition,  and  the  latter  is  a  constantly  weakening 
bond.  In  one  wing  of  the  Republican  party  are  the 
representatives  of  special  interests,  strengthened  by 
conservative  adherence  to  the  established  order;  in 
the  other  are  advocates  of  an  industrial  reform,  but 
by  a  gradual  and  evolutionary  process.  In  one 
wing  of  the  Democratic  party  are  the  representa- 
tives of  special  interests  strengthened  by  a  tradi- 
tional faith  in  the  philosophy  of  individualism ;  in 
the  other  are  advocates  of  an  industrial  reform  by 
radical  and  instantaneous  measures."  The  ques- 
tion seems  to  be  whether  readjustments  will  take 
place  entirely  within  the  two  great  parties  or 
whether  a  separate  organization  will  be  found 
necessary. 

32.  France. —  The  three  factors  referred  to  as 
explaining,  in  a  large  measure,  the  protection  re- 

56 


PROTECTION 

action  during  the  past  few  decades — wars,  changed 
industrial  conditions  and  the  rise  of  the  "historical 
school"  of  economists — affected  the  commercial 
policies  of  European  countries  in  much  the  same 
way  as  it  had  that  of  the  United  States,  although 
the  changes  were  not  equally  marked  in  all  countries. 
The  Franco-Prussian  War  arrested  the  free  trade 
policy  in  France  where  it  never  had  a  popular  hold, 
but  represented  rather  the  enforced  views  of  Na- 
poleon III.  and  a  majority  of  French  economists 
who  then,  as  well  as  now,  were  adherents  of  the 
English  school  of  political  economy.  The  need  of 
revenue  was  imperative  not  only  because  of  the 
expenses  of  the  struggle  which  included  a  war  in- 
demnity to  Germany  of  nearly  $1,000,000,000,  but 
also  because  of  the  cost  of  reconstruction  and  an 
annually  increasing  expenditure  for  general  state 
purposes.  French  commercial  politics  since  1871 
registers  a  constant  augmentation  of  protection, 
not  only  in  the  form  of  enhanced  import  duties,  but 
also  in  the  shape  of  discriminating  tonnage  duties, 
bounties  on  shipping,  the  shipping  monopolization 
of  trade  between  France  and  her  colonies,  etc. 
Her  protection  at  first  was  largely  to  secure  her 
manufactures  against  foreign  competition,  but  agri- 
cultural interests  received  marked  attention  after 
an  agricultural  depression  in  the  middle  of  the 
eighties.  To-day  protection  is  perhaps  as  strongly 
rooted  in  France  as  in  almost  any  country,  being 
favored  by  a  large  majority  of  nearly  all  classes  of 
agriculturists    and    manufacturers.     Most    of    the 

57 


COMMERCIAL    POLICIES 

French  economists,  however,  show  little  or  no  en- 
thusiasm for  this  doctrine. 

33.  Germany. —  Protection  reaction  in  Germany 
did  not  take  place  as  early  as  in  France.  In  fact 
for  several  years  after  the  Franco-Prussian  War 
duties  were  generally  lowered,  the  year  1877  regis- 
tering the  low  water  mark  in  German  free  trade 
tendencies.  However,  several  years  of  industrial 
depression,  beginning  with  the  year  1873,  followed 
by  a  series  of  poor  harvests  at  home  and  good 
harvests  abroad,  which  changed  Germany  from  an 
agricultural  exporting  to  an  agricultural  importing 
country,  united  a  large  majority  of  the  agrarians 
and  many  classes  of  manufacturers  in  a  campaign 
for  protection.  Germany,  too,  was  the  home  of  the 
"historical  school,"  and  the  majority  of  her  eco- 
nomists had  become  protectionists.  This  movement 
found  legislative  expression  in  a  series  of  tariff 
enactments  begun  under  Bismarck  in  1879  and  cul- 
minating in  1890  with  the  resignation  of  the  Iron 
Chancellor  and  the  appointment  of  Caprivi.  Bis- 
marck's commercial  policy  had  especially  protected 
agricultural  interests.  Caprivi  stood  for  more 
moderate  protection,  especially  as  applied  to  agri- 
cultural imports,  and  succeeded  in  negotiating  sev- 
eral commercial  treaties  in  which  his  economic  views 
were  incorporated.  In  recent  years,  however,  upon 
the  termination  of  the  Caprivi  treaties  (1903),  Ger- 
many has  inaugurated  a  new  tariff  law  which  stands 
for  higher  protection  all  along  the  line,  but  is  par- 
ticularly favorable  to  the  agrarian  classes.  Until 
within  very  recent  years  the  majority  of  the  Ger- 

58 


PROTECTION 

man  people  have  been  engaged  in  agricultural  pur- 
suits, but  the  census  of  1895  showed  scarcely  43  per 
cent,  of  the  people  thus  occupied.  The  percentage 
at  the  present  time  is  much  less  than  this.  Under 
the  circumstances  a  foreigner  finds  it  difficult  to 
understand  the  present  high  tariff  of  Germany. 

34.  Other  European  Countries. — The  general 
trend  in  Italy  was  not  unlike  that  in  France.  From 
the  formation  of  the  kingdom  to  1875  the  tendency 
was  toward  greater  freedom  of  trade.  Increased 
public  expenditures  led  to  a  general  tariff  revision 
in  1877  whereby  higher  duties  were  placed  on  all 
kinds  of  manufactures,  while  a  few  years  later  the 
agricultural  depression  was  largely  responsible  for 
the  tariff  act  of  1887  in  which  agrarian  protection 
was  the  distinctive  feature.  Since  that  date  there 
seems  to  be  no  abatement  in  the  general  protection 
tendency  excepting  a  slight  reactionary  tendency  as 
shown  in  several  of  her  commercial  treaties. 

The  Austrian  commercial  policy  shows  a  trend 
similar  to  that  of  Germany.  Higher  protection  was 
inaugurated  in  1878  and  has  been  the  continuous 
policy  since  then,  although  some  modifications  have 
been  made  by  commercial  treaties  with  Germany 
and  other  powers.  There  is  this  distinctive  differ- 
ence between  the  German  and  Austrian  policies — ■ 
the  former  favors  more  essentially  acrarian  pro- 
tection, while  the  latter  emphasizes  manufacturing 
protection.  Of  the  remaining  countries  of  Europe, 
Switzerland,  Holland,  Belgium,  and  the  Scandi- 
navian countries  may  be  characterized  as  countries 
of  moderate   protection   with   moderate   protection 

59 


C  O  M  ^I  E  R  C  I  A  L    POLICIES 

tendencies.  England  may  be  said  to  be  a  country 
with  a  moderate  revenue  tariff,  having  a  sHght  pro- 
tection tendency.  Russia,  Spain  and  Portugal  are 
countries  in  which  high  protection  tends  to  become 
more  and  more  excessive. 

BIBLIOGRAPHY 

A.  Consult  Chapter  III.  excepting  in  histories  of 
special  countries  consult  especially  standard  American 
histories  (Burgess,  Hart,  MacAIaster,  Rhoades,  Schouler, 
Walker  et  al)  ;  consult  also  indus.  histories  of  U.  S.  (Bo- 
gart,  Bolles,  Coman). 

B.  Cong.  Rec. ;  Indus.  Com.  Rep. ;  Various  Finance 
Reports  (see  Dewey's  Fin.  Hist.  U.  S.)  ;  House  (Mill) 
Report  of  1888.  No.  1496;  *Mess.  of  Pres. ;  Report  of 
Tariff  Commission  1882 ;  Hearings  before  Ways  and 
Means  Com.,  Senate  (Aldrich)  Report  of  1888,  No.  2332.; 
Speeches  of  Amer.  statesmen  (Blaine,  Calhoun,  Clay,  Gar- 
field, McKinley,   Sherman,  Webster). 

D.  Adams  Taxation  in  U.  S. ;  *Ashley's  ]\Iodern 
Tariff  Hist. ;  Ashley's  Tariff  Problem ;  Bastable's  Com.  of 
Nations,  also  his  Theory  of  Inter  Trade,  Ch.  IV. ;  Carey's 
Prin.  Soc.  Science ;  Channing  and  Hart's  Guide  to  Amer. 
Hist. ;  Chomley's  Protection  in  Canada  and  Aust. ;  Daw- 
son's Protection  in  Germany ;  **Dewey's  Fin.  Hist.  U.  S. ; 
George's  Protection  and  Free  Trade ;  Gibbin's  Econ.  and 
Indus.  Progress ;  **Hamilton's  Report  on  Manuf. ;  Hill, 
W.,  First  Stages  of  Tariff  Policy;  List's  Nat.  System; 
Meredith's  Protection  in  France ;  Patten's  Econ.  Basis  of 
Prot. ;  **Rabbeno"s  Com.  Pol.  of  U.  S. ;  Smart's  Return  to 
Prot. ;  **Stanwood's  Am.  Tariff  Controversies ;  Sumner's 
Hist,  of  Prot.;  **Taussig's  Hist,  of  Tariff;  Thompson's 
Hist.    Prot.    Tariff    Laws ;    Young's    Prot.    and    Progress. 

E.  Hill,  W.,  Protective  Purpose  of  Tariff  Act  of  1889, 
J.  Pol.  Econ.,  II.,  54;  Page,  T.  W.,  Earlier  Commercial 
Policy,  J.,  Pol.  Econ.,  1901-2,  X.,  161. 

60 


PROTECTION 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  Make  a  careful  abstract  of  Hamilton's  Report  on 
Manufactures. 

2.  Compare  the  views  of  Hamilton,  List,  Carey  and 
Patten  (consult  their  writings;  also  Rabbeno's  Com.  Pol. 
of  U.  S.) 

3.  Compare  Carey's  and  Greeley's  position  on  the  tariff, 

4.  What  did  Adam  Smith  mean  by  saying  that  the 
Mercantile  System  favored  producers  at  the  expense  of 
consumers?  Do  free  traders  sometimes  make  a  similar 
claim  against  modern  protection? 

5.  Does  sentiment  play  any  part  in  regard  to  protec- 
tion in  the  United  States?     (Seager,  p.  378.) 

6.  What  was  the  general  character  of  the  tariffs  of 
the  American  colonies?     (Q.  J.   Econ.,  VII.,  78,  1893). 

7.  What  is  likely  to  be  the  future  of  protection  in  the 
United  States?  (Seager,  p.  381;  Ann.  Amer.  Acad.  Pol. 
Sci.  Annual  meeting  of  1900,  pp.  153-169). 

8.  Is  there  anything  about  a  protective  tariff  in  the 
United  States  Constitution?  (see  Constitution,  also  J.  Pol. 
Econ.,  v.,  40,  1894). 

9.  If  you  believed  that  a  protective  tariff  in  the  United 
States  were  unconstitutional  could  you  conscientiously  vote 
for  protection? 

10.  Compare  the  national  platforms  of  the  Democratic 
party  since  the  Civil  War  with  reference  to  the  position  of 
the  party  on  the  constitutionality  of  protection. 

11.  What  were  the  principal  protection  arguments  of 
Blaine  in  his  debate  with  Gladstone?  (N.  Am.  R.,  CL., 
1889). 

12.  How  does  Ricardo's  view  regarding  the  advantages 
of  free  trade  compare  with  the  view  held  by  Adam  Smith? 
(Ricardo,  Ch.  XXV.).  with  that  held  by  J.  S.  Mill?  (Mill, 
Bk.,  v.,  Ch.  X.). 


61 


CHAPTER   V. 

CUSTOMS 
GENERAL:    IMPORT  DUTIES 

35.  Definition  and  Development  of  Customs 
Duties. —  Customs  duties  were  originally  taxes  on 
trade.  They  were  usually  payments  made  for  the 
use  of  roads,  bridges,  ferries,  harbor  facilities, 
warehouses,  weights  and  measures,  or  for  the  pro- 
tection of  goods  and  merchants  on  the  highways. 
According  to  Adam  Smith  they  "seem  to  have  been 
called  customs  as  denoting  customary  payments 
which  had  been  in  use  from  time  immemorial." 
Sometimes  these  duties  were  levied  at  the  boundary, 
as  for  example  in  an  insular  country  like  England 
where  from  very  early  times  there  was  an  export 
duty  on  wool,  but  more  often  they  were  collected 
at  the  gates  of  a  town,  at  various  places  of  deposit 
or  at  other  convenient  localities.  Fiscal  require- 
ments were  almost  the  sole  reason  for  the  levying 
of  these  duties.  In  the  course  of  time  as  states 
became  more  consolidated  these  innumerable  taxes 
became  more  and  more  of  a  hindrance  both  to  polit- 
ical and  economic  development.  The  result  was  a 
tendency  toward  the  elimination  of  restrictions  and 
the  unification  of  taxation  out  of  which  has  de- 
veloped in  most  modern  civilized  states  the  two-fold 
system    of    taxation — internal    taxes    and    customs 

62 


IMPORT    DUTIES 

duties.  The  former  include  that  part  of  the  income 
of  a  country  derived  largely  from  general  property, 
incomes,  stamps,  licenses  and  excises  or  taxes 
placed  on  certain  commodities  of  home  production 
and  consumption,  notably  on  tobacco  and  liquors, 
while  customs  duties  are  taxes  levied  upon  mer- 
chandise which  passes  the  frontier. 

Customs  duties  in  a  national  sense  were  first  de- 
veloped in  England,  beginning  especially  at  the 
time  of  Cromwell.  Colbert,  as  has  been  stated, 
cherished  the  plan  of  replacing  the  multitudinous 
local  customs  duties  in  France  by  general  taxes 
levied  at  the  national  boundary,  but  this  reform  was 
not  effected  until  the  period  of  the  Revolution.  A 
similar  movement  was  begun  in  other  European 
countries  during  the  latter  part  of  the  eighteenth 
century.  In  Germany  it  found  expression  in  the 
Prussian  tariff  act  of  1818  which  was  the  fore- 
runner of  the  German  tariff  union,  or  Zollverein, 
organized  in  1834.  In  early  American  history  tax- 
ation was  entirely  local  in  character  but  this  was 
largely  modified  in  1789  by  the  federal  constitutional 
requirement  that  "all  duties,  imports,  and  excises 
shall  be  uniform  throughout  the  United  States." 

36.  Classification  of  Customs  Duties. —  There 
are  three  general  classes  of  customs  duties :  ( i ) 
import  duties,  or  those  levied  on  merchandise 
brought  into  a  country;  (2)  export  duties,  or  those 
levied  on  merchandise  sent  out  of  a  country ;  and 
(3)  transit  duties,  or  those  levied  upon  merchandise 
passing  through  one  country  and  destined  for  an- 
other.    Customs  duties  may  be  based  upon  value 

63' 


COMMERCIAL    POLICIES 

and  measured  in  percentages,  or  they  may  be  based 
upon  a  unit  of  weight  or  measure  and  measured 
in  payments  per  pound,  ton,  kilogram,  dozen,  quart, 
liter,  etc.  The  former  are  called  ad  valorem  and  the 
latter,  specific  duties.  We  speak  of  a  systematic 
arrangement  of  customs  duties  as  a  customs  tariff 
or  more  often  as  simply  a  tariff. 

Customs  duties  may  be  either  for  purposes  of 
revenue  or  for  protection.  The  former  seem  to 
mean  duties  levied  for  the  sole  purpose  of  revenue, 
while  the  latter  would  appear  to  be  those  levied 
entirely  for  the  purpose  of  protection.  In  practice, 
however,  the  terms  are  not  used  in  this  absolute 
sense,  since  both  revenue  and  protection  play  more 
or  less  of  a  role  in  nearly  all  customs  duties.  It  is, 
therefore,  more  correct  to  define  revenue  customs 
duties  as  those  levied  upon  merchandise  primarily 
for  revenue  and  incidentally  for  protection,  while 
conversely  protective  duties  are  those  which  are 
primarily  for  protection  and  incidentally  for  revenue. 

As  might  easily  be  inferred  from  the  preceding 
chapter,  there  are  two  general  classes  of  protective 
duties — agricultural  and  industrial  or  manufactur- 
ing. German  protection,  for  example,  is  more 
essentially  agricultural,  while  protection  in  the 
United  States  is  principally  manufacturing.  Never- 
theless, the  characteristic  feature  of  modern  pro- 
tection is  that  it  is  neither  entirely  agricultural  nor 
wholly  manufacturing.  Intense  international  com- 
petition has  developed  a  community  of  interests  be- 
tween certain  branches  of  agriculture  and  industry 
so  that  in  most  countries  we  find  certain  agrarian 

64 


IMPORT    DUTIES 

and  industrial  interests  more  or  less  united  in  favor 
of  protection. 

37.  Definition  and  Classification  of  Import 
Duties. —  Import  duties  have  been  defined  as  taxes 
or  imposts  levied  upon  merchandise  brought  into  a 
country.  Their  purpose  may  be  to  raise  revenue 
or  to  protect  the  national  industry.  The  class  of 
commodities  subject  to  these  duties  varies  not  only 
according-  to  the  purpose  for  which  they  are  levied, 
whether  for  revenue  or  for  protection,  but  also  in 
order  to  equalize  the  divergent  social,  political,  and 
economic  conditions  in  a  country.  Import  duties  on 
articles  which  are  not  produced  in  a  country  and  for 
which  there  is  a  large  demand  bring  good  revenue 
returns.  Such  articles  may  be  manufactures  or 
raw  materials.  Revenue  import  duties  on  the 
former  are  especially  applicable  in  undeveloped 
countries,  like  the  South  American  states,  abound- 
ing in  raw  materials,  but  when  such  cotmtries 
become  industrially  more  advanced  and  labor  and 
capital  are  attracted  to  them,  these  duties  tend  to 
become  protective  in  character.  Among  industrial 
nations  there  are  also  many  instances  of  revenue 
import  duties  on  manufactures,  especially  on  such 
as  an  importing  country  recognizes  it  cannot  profit- 
ably undertake.  For  example,  prior  to  1891  the 
duty  on  tin  plate  imported  into  the  United  States 
was  purely  of  a  revenue  character  since  this  country 
manufactured  almost  none.  The  development  of 
the  American  tin  plate  industry  from  that  date  gave 
a  protective  character  to  the  duty.  Import  duties 
on  raw  materials  produced  to  a  little  or  no  extent 
5  65 


COMMERCIAL    POLICIES 

in  the  importing  country  constitute  an  important 
source  of  revenue.  Articles  in  this  category  may 
be  divided  into  two  groups,  food  products  such  as 
grain,  coffee,  tea,  sugar,  or  spices,  and  raw  ma- 
terials needed  for  manufactures  such  as  cotton,  wool, 
flax,  silk,  iron  or  coal.  Such  imports  are  usually 
characteristic  of  industrially  advanced  countries, 
and  duties  levied  on  them  are  often  objected  to  on 
the  ground  that  they  handicap  international  trade 
by  enhancing  the  price  of  manufactures,  directly  by 
increasing  the  cost  of  raw  materials  and  indirectly 
by  compelling  the  payment  of  higher  wages  because 
of  the  increased  cost  of  food  products. 

38.  Present  Importance  of  Import  Duties. — 
Import  duties  are  the  most  important  class  of  cus- 
toms duties,  being  employed  almost  universally  by 
modern  states.  Growing  national  expenditures  em- 
phasize their  importance  which,  however,  is  more 
than  counterbalanced  in  many  countries  by  increas- 
ing receipts  from  internal  revenue.  International 
competition  also  tends,  as  stated  above,  to  discourage 
the  levying  of  import  duties  on  either  the  raw  ma- 
terials used  in  manufactures  or  on  food  products. 

The  receipts  from  import  duties  are  especially 
important  in  the  South  American  countries  ranging, 
in  many  cases,  from  sixty  per  cent,  of  the  total 
receipts  to  practically  one  hundred  per  cent.  Great 
Britain  is  the  classic  land  of  revenue  import  duties, 
but  her  receipts  from  this  source  are  only  twenty- 
five  per  cent,  of  the  total,  and  the  percentages  for 
the  more  important  countries  of  continental  Europe, 
with  the  exception  of  Germany,  are  considerably  less 

66 


IMPORT    DUTIES 

than  this.  In  the  United  States  the  average  re- 
ceipts from  customs  duties  for  the  eight  year  periods 
1 890- 1 897  and  1898- 1905  were  $178,819,000  and 
$236,181,000  respectively,  but  the  former  repre- 
sented approximately  forty-two  per  cent,  of  the 
total  revenue  while  the  latter,  owing  to  a  relatively 
greater  increase  in  receipts  from  other  sources, 
principally  from  internal  revenue,  represented  only 
thirty-five  per  cent,  of  the  total.  These  figures  are 
significant  as  indicating  that  the  United  States,  in 
order  to  meet  increasing  expenditures,  will  have  to 
resort  more  and  more  either  to  strictly  revenue- 
producing  import  duties  or  to  receipts  from  internal 
revenue  such  as  excises,  taxes  on  inheritances,  and 
on  income,  if  the  constitutional  objection  to  the  last 
named  can  be  overcome. 

39.  Who  Pays  the  Tax? — In  the  tariff  contro- 
versies in  Europe  and  in  the  United  States  there 
has  been  much  discussion  as  to  who  pays  the  tax. 
No  absolute  answer  can  be  given  to  this  question. 
The  effect  of  import  duties  upon  the  price  of  a 
commodity  and  the  incidence  of  the  tax  vary  in 
different  countries  for  similar  articles  as  well  as 
for  different  articles  in  the  same  country,  or  for  like 
articles  at  different  times  in  a  given  place.  In  gen- 
eral, however,  it  may  be  said  that  if  the  total  supply 
of  a  commodity  comes  from  foreign  countries,  such 
as  coffee  or  tea  imported  into  a  country  like  the 
United  States,  an  import  duty  is  strictly  for  revenue 
and  the  consumer  pays  the  tax.  If,  for  example, 
the  price  of  Java  coffee  in  the  world's  markets  were 
twentv-five  cents  per  pound  and  the  import  duty  in 

67 


COMMERCIAL    POLICIES 

the  United  States  were  five  cents  per  pound,  the 
American  price,  eHminating  the  costs  of  transporta- 
tion and  similar  charges,  would  be  approximately 
thirty  cents,  and  the  difference  between  the  two 
prices,  or  five  cents  per  pound,  would  be  paid  in- 
directly by  the  consumer  into  the  treasury  of  the 
United  States.  If  there  be  an  inadequate  domestic 
production,  so  that  an  important  part  must  be  im- 
ported, such  as  sugar  in  the  United  States,  an  im- 
port duty  would  tend  to  enhance  the  price  of  the 
commodity  by  approximately  the  amount  of  the 
duty  and  the  consumer  would  still  pay  the  tax,  not 
entirely  to  the  government  as  in  the  case  of  coffee 
or  tea,  but  in  part  to  the  domestic  producers.  For 
example,  the  duty  collected  on  sugar  imported  into 
the  United  States  amounts  in  round  numbers  to 
$57,000,000  (average  for  1903-1905).  The  United 
States,  including  Hawaii  and  Porto  Rico,  produces 
about  forty  per  cent,  of  its  total  sugar  consumption. 
The  total  additional  cost  to  the  consumer  because 
of  the  import  duty  would  be,  therefore,  approxi- 
mately $95,000,000,  of  which  $57,000,000,  eliminat- 
ing the  cost  of  collection,  would  find  its  way  into 
the  United  States  Treasury,  the  balance,  or  $38,- 
000,000  being  paid  to  domestic  producers  in  the 
form  of  enhanced  prices  to  consumers. 

Finally  the  total  supply  of  a  commodity  may  be 
furnished  by  domestic  producers  or  manufactures. 
In  this  case  import  duties  are  primarily  for  pro- 
tection. If  there  be  a  rise  of  price  under  these 
conditions  it  is  a  tax  paid  by  consumers,  not  to  the 
government,   but   to   domestic   producers.     One  of 

68 


IMPORT    DUTIES 

two  things  may  happen.  The  import  duty  may  have 
a  temporary  effect  of  raising  the  price,  but  after  the 
industry  is  well  established  domestic  competition 
may  force  down  the  price  until  it  is  as  low  as  the 
price  in  the  world  markets.  If  goods  are  imported 
under  these  conditions  the  tax  is  paid  by  the  for- 
eigner and  not  by  the  consumer.  On  the  other 
hand,  there  may  be  an  absence  of  domestic  compe- 
tition, as  happens  in  many  instances  where  the  sup- 
ply is  largely  controlled  by  industrial  combinations 
or  trusts  in  which  case  there  is  a  tendency  for  the 
price  of  goods  to  advance  to  a  point  slightly  less 
than  the  price  in  the  world  market  plus  the  amount 
of  the  import  duty.  Under  such  a  condition  the 
added  price  is  paid  by  consumers  to  the  trust  or- 
ganization. 

40.  Trusts  and  "Dumping." — The  rapid  de- 
velopment of  industrial  consolidations  in  the  United 
States  in  recent  years  has  been  contemporaneous 
with  very  high  protective  import  duties.  It  is  also 
to  be  observed  that,  while  the  price  of  trust-made 
goods  in  the  home  market  has  often  been  in  excess 
of  the  world  market  price,  there  are  many  instances 
where  the  same  commodities  are  sold  in  foreign 
markets  at  less  than  the  prices  ruling  in  the  world 
markets.  This  process  of  selling  surplus  goods  in 
foreign  markets  at  excessively  low  prices,  usually 
in  order  to  decrease  the  home  supply  for  the  purpose 
of  maintaining  high  domestic  prices,  is  called 
"dumping."  Such  a  course  often  affects  disad- 
vantageously  the  protected  interests  of  other  coun- 
tries by  making  possible  importations  at  prices  which 

69 


COMMERCIAL    POLICIES 

home  industries  cannot  meet.  Such  a  situation  is 
met  in  Canada  by  the  levying  of  "a  special  duty 
(or  dumping  duty)  equal  to  .the  difference  between 
the  selling  price  of  the  article  for  export  and  the 
fair  market  value  thereof  for  home  consumption." 
The  prevalence  of  trusts,  their  tendencies  in  many 
cases  to  suppress  competition  and  raise  prices,  and 
their  resort  to  "dumping,"  have  aroused  popular 
hostility  in  the  United  States  against  most  forms  of 
industrial  consolidation  and  have  provoked  dis- 
cussion as  to  their  relation  to  protection.  There 
seems  to  be  a  popular  demand  to  lower  the  duties 
on  trust-made  goods,  some  going  so  far  as  to  ad- 
vocate the  abolition  of  all  import  duties  on  such 
articles,  affirming  that  the  "tariff  is  the  mother  of 
trusts." 

While  it  is  no  doubt  true  that  protective  import 
duties  have  in  many  instances  encouraged  the 
growth  of  large  corporate  organizations,  it  is  not 
correct  to  make  the  general  statement  that  trusts 
exist  principally  because  of  them.  Upon  this  basis 
how  are  we  to  explain  their  prevalence  in  a  free 
trade  country  like  Great  Britain?  Trusts  exist  be- 
cause of  certain  economies  effected  in  their  organi- 
zation such  as  is  inherent  in  all  businesses  conducted 
on  a  large  scale.  The  abolition  of  all  import  duties 
on  trust-made  goods  might  in  many  instances  ham- 
per the  development  of  industrial  consolidations,  or 
in  some  cases  make  them  unprofitable,  but  in  general 
it  would  tend  to  change  the  basis  of  their  organi- 
zation, making  them  international  rather  than  na- 
tional in  scope. 

70 


IMPORT    DUTIES 

BIBLIOGRAPHY 

A.  In  general  consult  bibliographies  of  chapters  VI, 
VII,  VIII,  IX  and  X;  see  also  standard  *dictionaries  and 
*encyclopaedias,  **economic  text-books  and  industrial  his- 
tories of  modern  Europe  and  America,  (see  chapters  I. 
and  IV.).    *Poole's  Index. 

B.  Consult  Doc.  Catalog;  also  Con.  Rep.,  (especially 
American  and  British  and  Special  U.  S.  Consular  Reports 
on  Tariffs)  ;  Indus.  Com.  Rep. ;  Mess,  of  Pres. ;  Customs 
tariffs  are  published  officially  by  most  governments ; 
**American  tariff  law  may  be  obtained  gratis  from  the 
U.  S.  Treas.  Dept. ;  see  also  Proctor's  Tariff  Acts  of  U.  S. 
1789-1897,  Stat,  at  L.  of  U.  S.  and  R.  S.  of  U.  S.  For 
British  tariff  laws  consult  "Tariff  Acts  (Brit.)  1800-1897 
and  Hist,  of  Receipts  since  1660,"  Brit.  Pari.  Rep.  1898  C. 
8706 ;  Tariffs  of  Foreign  Countries,  List  of  Works  on,  U. 
S    Library  of  Cong.,   1906. 

D.  Unofficially  various  compendiums  of  tariff  laws  are 
published  (Andrews,  Downing,  Vandergrift  and  especially 
**KelIey's  Customs  Tariffs  of  the  World). 

Bastable's  Pub.  Finance,  Bk.  IV.,  ch.  VII.;  Bolen's 
Trusts  and  Tariffs;  Van  der  Borght,  pp.  428-444; 
**Dewey's  Fin.  Hist,  of  U.  S.  (with  ref.)  ;  Grunzel,  pp. 
341-366;  Pierce's  Tariff  and  Trusts;  Root's  Tariff  and 
Trade. 

E.  Valuable  material  may  be  found  in  the  Economic 
Journals   (see  Appendix). 

Davenport,  H.  J.,  Real  Cost  of  the  Tariff,  J.  Pol.  Econ., 
v.,  506,  1897. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  What  is  the  origin  of  the  term  "customs"  as  used 
in  the  present  chapter?  (A.  Smith,  Bk.,  v.,  ch.  ii,  Art.  4; 
"customs  duties"  in  Encyc.  Brit. ;  id.  in  Lalor's  Cycl. ; 
"Custom"  in  Palg.  Diet.) 

2.  Give  examples  of  a  customs  duty  which  is  for 
revenue  in  one  country  and  for  protection  in  another. 

71 


COMMERCIAL    POLICIES 

3.  Why  do  we  speak  of  the  aboHtion  of  protective 
duties  in  England  as  a  "repeal  of  the  corn  laws?" 

4.  What  has  been  the  general  attitude  of  organizations 
like  chambers  of  commerce  in  the  United  States  toward 
the  tariff?    (see  annual  proceedings). 

5.  According  to  the  report  of  the  U.  S.  Industrial 
Commission  what  is  the  relation  between  the  trusts  and 
the  tariff?     (Indus.  Com.  Rep.  XIX.,  pp.  627-631.) 

6.  Are  not  many  members  of  Congress  experts  on 
tariff  questions?  What  would  be  the  advantage  of  an  ex- 
pert tariff  commission  in  the  United  States?  (Indus.  Com, 
Rep.,  XIV.,  xc;  Pres.  Roosevelt's  Messages). 

7.  What  should  be  the  general  aim  of  all  legislation? 
Is  legislation  which  favors  certain  classes  in  a  country 
justifiable?  How  about  a  protective  tariff?  Can  you  men- 
tion any  legislation  that  does  not  favor  certain  classes  of 
society?  Is  the  fact  that  the  United  States  has  a  protec- 
tive tariff  an  evidence  that  a  majority  of  the  American 
people  favor  protection? 

8.  The  text  states :  "Import  duties  on  raw  materials 
produced  to  a  little  or  no  extent  in  the  importing  country 
constitute  an  important  source  of  revenue."  Give  examples 
where  such  conditions  exist.  In  the  examples  cited  are 
the  imported  raw  materials  subject  to  an  import  duty?  If 
not,  why  not? 

9.  Do  you  agree  with  the  general  statement  in  the 
text  that  if  the  total  supply  of  a  commodity  comes  from 
foreign  countries  the  consumer  pays  the  tax?  Suppose  the 
United  States  government  places  an  import  duty  on  tea  or 
coffee  would  this  not  tend  to  raise  the  domestic  price?  If 
so,  would  not  the  enhanced  price  tend  to  decrease  con- 
sumption? Would  not  decreased  consumption  tend  to  lower 
price  in  the  world  markets  so  that  the  domestic  price 
would  not  equal  the  former  price  plus  the  full  amount  of 
the  duty?  Under  such  conditions  would  not  at  least  a 
part  of  the  duty  be  paid  by  the  foreign  producer  or  ex- 
porter? 


7a 


CHAPTER   VI. 

CUSTOMS 
EXPORT  AND  TRANSIT  DUTIES:  PROHIBITIONS 

41.  Definition  and  Classification  of  Export 
Duties. —  Export  duties  are  taxes  levied  on  mer- 
chandise sent  out  of  a  country.  Although  form- 
erly much  employed  they  do  not  form  a  very 
important  feature  of  the  commercial  policies  of 
modern  industrial  nations.  Under  mercantilism  it 
was  the  general  policy  to  encourage  manufactures 
by  placing  an  export  duty  upon  raw  materials. 
England  at  a  very  early  period  levied  such  a  duty 
on  certain  agricultural  products,  notably  on  wool, 
and  this  policy  was  in  use  in  many  of  her  colonies. 
In  the  United  States  there  is  a  constitutional  pro- 
vision that  "no  tax  or  duty  shall  be  laid  on  articles 
exported  from  any  state,"  this  being  a  concession 
in  favor  of  the  South  which  feared  lest  its  exporta- 
tion of  agricultural  products  might  be  interfered 
with.  The  accepted  view  regarding  export  duties 
appears  to  be  that  they  restrict  exportations  except 
in  rare  cases  where  a  country  possesses  a  monopoly 
of  the  exported  article.  If  all  countries  should  levy 
an  equal  duty  on  the  same  commodity  its  price  would 
be  raised  to  cover  the  amount  of  the  duty,  and  con- 
sumers would  pay  at  least  the  greater  part  of  the 
tax.  But  such  a  duty  on  any  one  article  has  never 
been  universal  and  the  price  paid  by  the  foreign 

73 


C  O  AOI  E  R  C I  A  L    POLICIES 

consumer  has  generally  been  regulated  by  many 
other  more  important  factors,  so  that  usually  the  tax 
has  been  paid  by  the  producer  in  the  form  of  an 
enhanced  cost  of  production  or  of  lessened  profits. 
42.  Revenue  Export  Duties. —  In  the  larger 
number  of  instances  export  duties  are  primarily  for 
revenue.  Some  countries  levy  a  uniform  ad  val- 
orem duty  on  all  exported  articles.  This  is  the 
case,  for  instance,  in  Turkey  and  in  the  Sudan, 
where  the  export  rate  is  one  per  centum  in  each  case. 
In  a  l^rge  number  of  the  less  industrially  advanced 
countries  such  as  Persia  and  Servia,  most  of  the 
West  Indian,  Central  and  South  American  coun- 
tries, European  colonial  possessions  in  Africa  and 
in  South  Eastern  Asia,  specific  export  duties  are 
for  the  most  paid  upon  articles  of  domestic  pro- 
duction. In  the  earlier  Japanese  tariff  there  were 
a  large  number  of  both  specific  and  ad  valorem  ex- 
port duties,  but  these  have  largely  disappeared  in 
the  new  law.  Occasionally  export  duties  are  levied 
to  meet  extraordinary  expenditures.  England,  for 
example,  placed  an  export  duty  on  coal,  coke  and 
manufactured  fuel  at  the  time  of  the  Boer  war. 
Some  countries  collect  large  revenues  from  certain 
export  commodities  of  which  they  possess  a  virtual 
monopoly.  One  of  the  most  conspicuous  examples 
is  the  export  duty  on  Chilean  nitrate  of  soda. 
Similar  duties  are  levied  on  cork  exported  from 
Spain  and  Portugal,  and  on  Paraguayan  yerba  mate. 
Among  articles  subjected  to  export  duties  some  of 
the  most  prominent  are  coffee,  rubber,  sugar,  rum 
and  molasses,  tobacco,  tropical   fruits,  woods  and 

74 


CUSTOMS 

nuts,  hides  and  skins  from  Central  and  South 
America  and  from  the  West  Indies ;  rubber,  ivory, 
tropical  nuts  and  woods,  sponges  and  olives  from 
Africa ;  opium,  tea,  rice,  silk,  tin,  tobacco,  spices, 
shells,  skins  and  precious  stones  from  different  parts 
of  Asia. 

43.  Protection  Export  Duties. —  Protection  ex- 
port duties  are  not  so  numerous  or  so  easy  to  dis- 
tinguish in  the  various  tariff  laws  as  those  of  a 
revenue  character.  There  are  export  duties  on 
rags  in  many  European  customs  laws  for  the  pur- 
pose of  protecting  the  manufacturers  of  paper,  but 
since  wood  has  been  used  so  largely  in  paper-mak- 
ing these  duties  have  lost  their  importance  and  in 
some  instances  have  been  repealed.  Norway  and 
Sweden  place  export  duties  on  wood  and  timber  in 
order  to  preserve  their  forests  and  forest  products, 
while  Switzerland  has  export  duties  on  cattle,  skins 
and  hides  in  order  to  protect  her  dairy  and  leather 
interests.  For  the  purpose  of  encouraging  the  pro- 
duction of  mohair  in  South  Africa  there  is  an  export 
duty  on  Angora  goats.  There  is  also  an  export 
tax  of  iioo  on  ostriches  and  of  £5  on  ostrich  eggs, 
the  purpose  of  which  is  to  enable  certain  South 
African  countries  to  maintain  a  monopoly  of  sup- 
plying other  countries  with  ostrich  feathers.  In 
order  to  preserve  their  coal  and  iron  supplies  some 
of  the  countries  of  Western  Europe  are  discussing 
the  advisability  of  levying  export  duties  on  these 
articles,  but  no  definite  action  has  been  taken  in 
the  matter.  Closely  connected  with  the  so-called 
protection  export  duties  are  those  of  a  police  char- 

75 


COMMERCIAL    POLICIES 

acter  which  are  levied  in  order  to  avoid  or  alleviate 
some  distressing  condition.  They  are  generally  of 
a  temporary  character,  and  may  be  employed,  for 
instance,  when  poor  harvests  threaten  famine  to  a 
country  or  when  animal  plagues  create  a  scarcity 
of  meat  products.  Such  conditions  arose  in  the 
German  protectorate  of  Togoland  in  1894  when  the 
government  was  compelled  to  lay  an  export  duty 
on  sheep  and  Indian  corn. 

44.  Transit  Duties. —  Transit  duties  are  taxes 
levied  upon  merchandise  passing  through  one  coun- 
try and  destined  for  another.  They  presuppose  a 
comparatively  advanced  national  development. 
During  the  Aliddle  Ages,  when  political  and  indus- 
trial life  was  local  in  character,  these  duties  were 
hardly  to  be  distinguished  from  those  general  trade 
taxes  levied  upon  goods  entering  or  leaving  local 
centres  or  from  bridge  and  road  tolls  and  other 
forms  of  taxation.  Even  under  the  more  advanced 
national  development  of  mercantilism,  although 
transit  duties  were  generally  levied,  an  effective 
system  of  administration  was  difficult.  In  more 
recent  times  the  advent  of  the  railroads  has  caused 
competition  to  arise  among  various  nations  for  the 
land  carrying  trade  and  this  has  brought  about  a 
general  abolition  of  these  duties  in  modern  indus- 
trial countries.  In  Russia  there  are  no  transit  duties 
except  for  foreign  goods  destined  for  Persia,  the 
purpose  of  these  taxes  being  to  favor  Russian 
goods  in  the  Persian  market.  Until  recently  there 
were  transit  duties  on  goods  entering  the  Transvaal 

76 


CUSTOMS 

by  way  of  Cape  Colony  or  through  Portuguese  ter- 
ritory from  Delagoa  Bay. 

As  regards  the  administration  of  transit  trade 
the  goods  are  usually  sent  in  bond  and  under  regu- 
lations which  ensure  against  smuggling.  Customs 
officers  sometimes  accompany  the  goods.  The  tran- 
sit may  be  direct,  the  merchandise  being  sent 
through  without  reloading,  as  would  probably  hap- 
pen in  the  case  of  Austrian  goods  sent  to  the  Baltic 
countries  over  German  territory,  or  it  may  be  indi- 
rect if  the  goods  en  route  be  unloaded,  divided  or 
placed  in  warehouses  as  would  be  the  case  for 
English  goods  sent  to  Canada  via  New  York  or  to 
Switzerland  via  North  Sea  or  Mediterranean  ports. 

45.  Import,  Export  and  Transit  Prohibitions. — 
Prohibitions  formed  an  important  feature  under 
the  Mercantile  System.  As  has  been  stated,  the 
importation  of  manufactures  and  the  exportation 
of  raw  materials  were  often  forbidden  and  both 
were  frequently  made  more  effective  by  the  prohi- 
bition of  transit  trade.  The  purpose  of  such  legis- 
lation was  usually  to  encourage  domestic  manufac- 
tures and  to  foster  an  excess  value  of  exports  over 
imports  so  that  the  precious  metals  might  be 
imported  to  pay  the  balance.  In  more  recent  com- 
mercial politics  of  advanced  nations  prohibitions 
play  a  relatively  unimportant  role,  their  place  being 
taken  by  customs  duties  which  are  based,  by  means 
of  better  statistical  and  technical  knowledge,  upon 
national  industrial  conditions  and  are  tempered  by 
a  more  developed  sense  of  international  legal,  social 
and  economic  relations.     In  some  countries,  notably 

17 


C  O  .AI  3.1  E  R  C  I  A  L    POLICIES 

in  Germany,  prohibitions  are  put  into  operation 
largely  by  executive  decrees  or  proclamations,  but 
in  most  countries,  including  the  United  States  and 
the  United  Kingdom,  there  are  certain  specific  pro- 
hibitions in  the  tariff  act  coupled  with  a  general 
power  permitting  prohibitory  decrees  or  proclama- 
tions to  be  promulgated  in  special  cases. 

46.  Protection  and  Revenue  Prohibitions. — 
Some  prohibitions  are  for  purposes  of  economic 
protection,  as,  for  example,  the  Canadian  import 
prohibition  of  "oleomargarine,  butterine  or  similar 
substitute  for  butter,"  or  the  Persian  prohibitory 
importation  of  "aniline,  aniline  colors  and  all  colors 
prepared  with  aniline."  The  aim  of  the  former  is 
ostensibly  to  protect  Canadian  dairy  interests,  while 
the  purpose  of  the  latter  is  to  discourage  the  deter- 
ioration of  Persian  rugs  by  the  use  of  inferior  dyes. 
The  importation  of  sugar  into  Great  Britain  from 
sugar  bounty-paying  countries  is  prohibited,  the 
main  purposes  of  this  legislation  being  to  protect 
the  sugar  producing  interests  of  certain  British 
colonies  and  the  sugar  refining  interests  of  Great 
Britain. 

Many  countries,  among  them  England  and  most 
of  her  self-governing  colonies  and  the  United 
States,  protect  home  labor  by  prohibiting  the  im- 
portation of  prison  or  pauper  made  goods.  The 
American  tariff  states  "that  all  goods,  wares,  arti- 
cles and  merchandise  manufactured  wholly  or  in 
part  in  any  foreign  country  by  convict  labor  shall 
not  be  entitled  to  entrv  at  anv  of  the  ports  of  the 
United  States." 

78 


CUSTOMS 

Many  tariff  laws  contain  import  prohibitions  of 
publications  which  infringe  upon  domestic  copy- 
right and  of  merchandise  falsely  labelled  with  a 
domestic  trade  mark.  The  American  tariff  law  of 
1897  stipulates  in  section  eleven  "that  no  article  of 
imported  merchandise  which  shall  copy  or  simulate 
the  name  or  trade  mark  of  any  domestic  manufac- 
ture or  manufacturer,  or  which  shall  bear  a  name 
or  mark  which  is  calculated  to  induce  the  public  to 
believe  that  the  article  is  manufactured  in  the 
United  States  shall  be  permitted  to  enter  at  any 
custom  house  of  the  United  States." 

Sometimes  prohibitions  are  of  a  revenue  charac- 
ter, notably  in  the  case  of  import  prohibitions  of 
articles  of  government  monopoly  such  as  matches, 
tobacco,  salt  or  playing  cards  in  several  countries. 
The  importation  of  such  articles  is  either  absolutely 
prohibited  or  permitted  only  under  very  stringent 
governmental  regulations. 

While  prohibitions  may  be  for  purposes  of  pro- 
tection or  for  revenue,  they  are  more  often  based 
upon  grounds  of  sanitation,  morality  or  public 
security. 

47.  Prohibitions  Based  on  Sanitary  Grounds. — 
Many  states  prohibit  the  importation  of  articles 
regarded  as  dangerous  to  public  health.  The  list 
of  prohibited  articles  in  this  category  more  com- 
monly includes  "infected  cattle,  sheep,  or  other  ani- 
mals or  the  carcasses  thereof,  and  hides,  skins, 
horns,  hoofs,  or  any  parts  of  other  animals,"-  adul- 
terated tea,  grape  vines,  fruit  trees,  spurious  liquors 
and  in  general  "comestibles  in  a  state  of  decompo- 

79 


COMMERCIAL    POLICIES 

sition  or  other  products  injurious  to  public  health." 
Section  twenty-five  of  the  American  tariff  act  states 
"that  the  importation  of  neat  cattle  and  the  hides 
of  neat  cattle  from  any  foreign  country  into  the 
United  States  is  prohibited,"  but  the  Secretary  of 
the  Treasury  is  empowered  to  suspend  this  import 
prohibition  as  regards  any  country  when  ''such  im- 
portation will  not  tend  to  the  introduction  or  spread 
of  contagious  or  infectious  diseases  among  the 
cattle  of  the  United  States."  Furthermore,  Ameri- 
can law  prohibits  the  importation  of  any  adulterated 
or  unwholesome  food  or  drug,  or  any  vinous, 
spirituous  or  malt  liquors  adulterated  or  mixed  with 
any  poisonous  or  noxious  chemical,  drug,  or  other 
ingredients.  (Acts  of  August  30,  1890,  and 
March  i,  1899.)  A  very  extensive  power  is  also 
given  the  President  to  suspend  by  proclamation  the 
importation  of  any  articles  he  regards  as  "dangerous 
to  the  health  or  welfare  of  the  people  of  the  United 
States"  (Section  4  of  the  Act  of  March  3,  1891). 

Sometimes  sanitary  prohibitions  are  of  an  inter- 
national character.  By  virtue  of  the  international 
phyloxera  convention  of  1883,  for  example,  the  im- 
portation of  grape  vines  and  wine  props  into  several 
European  countries  was  forbidden,  while  the  im- 
portation of  grapes  was  carefully  regulated.  The 
general  exclusion  in  European  countries  of  certain 
American  agricultural  products  suggests  more  than 
national  efforts  in  this  direction.  Such  exclusion 
acts  have  not,  however,  been  based  upon  open  in- 
ternational agreements. 


80 


CUSTOMS 

48.  Prohibitions  Based  on  Moral  or  Religious 
Grounds. —  All  civilized  states  prohibit  the  impor- 
tation of  certain  articles  offensive  to  the  national 
morality.  Usually  these  prohibitions  are  incor- 
porated in  the  general  tariff  act,  but  sometimes  they 
are  to  be  found  in  special  statutes.  Section  sixteen 
of  the  American  tariff  forbids  the  importation  of 
"any  obscene  book,  pamphlet,  paper,  writing,  adver- 
tisement, circular,  print,  picture,  drawing,  or  other 
representation,  figure  or  image  on  or  of  paper  or 
other  material,  or  any  case,  instrument  or  other 
article  of  an  immoral  nature,  or  any  drug  or  medi- 
cine, or  any  article  whatever  for  the  prevention  of 
conception  or  for  causing  unlawful  abortion,  or  any 
lottery  ticket  or  any  advertisement  of  any  lottery." 
The  Russian  tariff  includes  in  its  prohibitions  the 
"importation  of  articles  of  an  irreligious,  irreverent, 
blasphemous  or  impious  character."  In  the  Persian 
law  there  is  an  import  prohibition  of  all  writings 
or  pictures  which  are  opposed  to  the  Mohammedan 
religion,  while  the  Sudan  tariff  prohibits  the  im- 
portation of  all  articles  "calculated  to  throw  con- 
tempt on  the  Moslem  or  Christian  religion."  Many 
nations  prohibit  the  importation  of  certain  articles 
the  consumption  of  which  they  regard  as  morally 
or  physically  degrading  to  their  inhabitants.  Japan 
prohibits  the  importation  of  opium,  excepting  such 
as  is  imported  by  the  Imperial  government  for 
medicinal  purposes.  In  the  United  States  the  im- 
portation of  opium  by  a  subject  of  the  Emperor  of 
China  is  prohibited.  China  herself  has  on  many 
occasions  attempted  to  prohibit  the  importation  of 
6  81 


COMMERCIAL    POLICIES 

this  pernicious  drug,  but  up  to  the  present  time  her 
efforts  in  this  direction  have  been  frustrated  largely 
on  account  of  the  hostile  attitude  of  certain  European 
powers.  Russia  prohibits  the  importation  of  corn 
spirit  and  vodka  into  Amoor  from  China,  and  of 
grape  brandy  into  her  Trans-Caspian  territory. 

There  are  also  agreements  of  an  international 
character  in  this  category.  For  example  the  Brus- 
sels conferences  of  1885  and  1890  decreed  against 
the  African  slave  trade  and  the  selling  of  liquor  to 
native  Africans. 

49.  Prohibitions  Based  on  Grounds  of  Public 
Security. —  There  are  prohibitions  against  the  im- 
portation of  fire  arms,  ammunition  and  general 
munitions  of  war  in  many  parts  of  Africa,  in  coun- 
tries of  Western  Asia,  notably  in  Turkey  and  in 
Persia  and  in  many  of  the  East  and  West  Indian 
islands.  Several  of  the  Central  and  South  Ameri- 
can tariffs  also  contain  similar  prohibitions,  but 
such  restrictions  are  not  common  in  the  laws  of  the 
more  advanced  nations.  The  Philippine  tariff  in- 
cludes in  the  list  of  excluded  articles  "dynamite, 
gunpowder,  and  similar  explosives,  and  fire  arms 
of  all  descriptions  and  detached  parts  thereof,  unless 
the  importer  shall  produce  a  special  authorization 
for  landing  issued  to  him  by  the  civil  governor." 
The  Russian  tariff  is  very  sweeping  in  this  partic- 
ular, many  kinds  of  arms  and  ammunition  being 
entirely  prohibited,  while  other  kinds  may  be 
imported  only  by  special  permission  of  the  Minister 
of  Finance.  It  is  also  interesting  to  note  that  in 
Great  Britain  among  the  articles  the  exportation  of 

82 


CUSTOMS 

which  may  be  prohibited  or  restricted  by  proclama- 
tion or  by  orders  in  council,  are  to  be  found  "arms 
(including  fowling  pieces  and  gunstocks),  ammuni- 
tion and  gunpowder,  military  and  naval  stores, 
and  any  articles  which  may  be  judged  capable  of 
being  converted  into  or  made  useful  in  increasing 
the  quantity  of  military  or  naval  stores,  provisions  or 
victuals  which  may  be  used  as  food  for  man." 
The  tariff  laws  of  many  states  contain  import  pro- 
hibitions of  debased  or  counterfeit  coin,  as  well  as 
also  of  false  weights  and  measures.  The  English 
law  includes  in  this  list  "false  money  or  counterfeit 
sterling;  silver  coin  of  the  realm,  or  any  money 
purporting  to  be  such,  not  being  of  the  established 
standard  of  weight  or  fineness ;  all  coins  coined  in 
any  foreign  country  other  than  gold  and  silver 
coins."  The  Canadian  law  has  a  similar  regulation, 
and  besides  this  Canada  prohibits  the  importation 
of  "books,  printed  paper,  drawings,  paintings, 
prints,  photographs  or  representations  of  any  kind 
of  a  treasonable  or  seditious"  character.  Other 
states  have  similar  laws,  excluding  not  only  articles 
but  also  persons  regarded  as  politically  undesirable. 
The  United  States  has  important  legislation  exclud- 
ing or  restricting  foreign  immigration,  but  such 
laws  do  not  form  a  part  of  the  tariff  policy  either 
in  the  American  Republic  or  in  other  countries. 

Finally,  there  is  a  certain  class  of  prohibitions  of 
a  temporary  character  based  upon  grounds  of  public 
security.  For  example,  Russia  prohibited  the  ex- 
portation of  wheat  in  1892  because  of  a  shortage  of 
the  domestic  crop,  and  for  a  similar  reason  Germany 

83 


COMMERCIAL    POLICIES 

and   Austria-Hungary  in  the   following  year   pro- 
hibited the  exportation  of  various  kinds  of  fodder. 

BIBLIOGRAPHY 
A.     Consult  bibliography  of  the  preceding  chapter  (V.). 
SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  If  there  were  no  constitutional  prohibition  against 
export  duties  in  the  United  States  what  would  be  the 
economic  effect  of  an  export  duty  on  cotton?  On  wheat, 
when  the  United  States  had  a  good  harvest  and  there  were 
poor  harvests  in  other  countries?  When  the  reverse  con- 
ditions prevailed? 

2.  Make  an  abstract  of  the  American  statutes  affecting 
transit  trade  (R.  S.  of  U.  S.). 

3.  What  would  be  the  effect  upon  American  commerce 
were  a  transit  duty  levied  on  goods  imported  at  New  York 
or  any  other  port  of  the  United  States  and  destined  for 
Canada  or  Mexico? 

4.  What  would  be  the  effect  of  a  transit  duty  in  Eng- 
land? Suppose  the  same  transit  duty  had  to  be  paid  at  all 
the  Northern  ports  of  Europe?     At  all  European  ports? 

5.  Is  there  any  practical  difference  between  customs 
prohibitions  and  prohibitory  customs  duties? 

6.  Is  international  commerce  an  aid  to  civilization? 
If  so,  has  one  nation  any  moral  right  to  prohibit  its  citizens 
or  subjects  from  trading  with  foreigners?  Under  such 
conditions  has  a  foreign  government  any  recourse?  Give 
examples. 

7.  What  were  the  terms  of  the  compromise  which  led 
to  the  constitutional  prohibition  of  export  duties  in  the 
United  States?  (Well's  Merchant  Marine,  Ch.  IV;  also 
Madison's  Notes  on  the  Constitutional  Convention). 

8.  May  a  state  of  the  American  Union  levy  customs 
duties  or  prohibit  imports?  The  boll  weevil  insect  threatens 
the  cotton  crop  of  the  South  with  destruction.  May  Louis- 
iana, in  order  to  protect  herself  against  this  danger  pro- 

84 


CUSTOMS 

hibit  the  importation  of  cotton  from  Texas   (U.  S.  Consti- 
tution, Art.   I.,  Sec    lo)  ? 

9.  Study  the  tariff  laws  of  various  countries  and  make 
a  list  of  prohibitions  (not  mentioned  in  the  text)  based  on 
(i)  sanitary  grounds,  (2)  moral  grounds  and  (3)  grounds 
of  public  security.  (Kelley's  Customs  Tariff,  also  special 
U.  S.  Consular  Reports  on  Tariff.) 

10.  May  the  United  States  exclude  any  foreigner,  even 
of  a  friendly  power?  (Chinese  Exclusion  Case  130  U.  S. 
591 ;  also  Art.  "Immigration"  in  Am.  and  Eng.  Encyc. 
Law). 

11.  Since  the  United  States  Constitution  prohibits  ex- 
port duties  how  do  you  explain  the  existence  of  export 
duties  in  the  Philippine  tariff? 

12.  May  foreign  countries  prohibit  American  imports, 
in  accordance  with  treaty  rights?  (See  Prussian-American 
treaty  of  1828). 

13.  Several  European  countries  have  prohibited  the 
importation  of  several  American  agricultural  products. 
Was  there  any  politics  in  these  measures?  (See  index  to 
For.  Rel.  of  U.  S.) 


8S 


CHAPTER  VII. 

CUSTOMS 
TARIFFS  AND  TARIFF  SYSTEMS 

50.  Introduction. —  A  tariff  is  a  table  or  scale  of 
charges.  Thus  there  are  railroad  tariffs,  insurance 
tariffs,  telegraph  tariffs,  custom  tariffs  and  the  like. 
A  customs  tariff  is  a  systematic  arrangement  of  cus- 
toms duties.  It  is  spoken  of  as  a  tariff  law,  act  or 
bill  and  is  usually  divided  for  purposes  of  conveni- 
ence into  schedules,  each  schedule  comprising  the 
principal  articles  of  allied  groups  which  are  subdi- 
vided into  numerous  sections  with  duties  or  rates 
for  each  section.  The  general  arrangement  is,  in 
many  instances,  alphabetical.  A  tariff  law  is  based 
upon  the  general  economic  and  political  conditions 
of  a  country  and  represents  a  compromise  between 
the  conflicting  interests  of  producers  and  consum- 
ers. It  also  furnishes  a  basis  upon  which  com- 
mercial relations  with  foreign  countries  may  be 
regulated.  The  general  character  of  a  customs 
tariff  depends  largely  upon  its  purpose,  whether  it 
be  primarily  for  protection  or  primarily  for  revenue. 
In  the  latter  case  but  few  articles  are  taxed.  The 
revenue  tariff  act  of  Great  Britain,  for  example,  con- 
tains only  about  forty  rates  and  eighteen  different 
classes  of  articles  and  may  easily  be  printed  on  four 
or  five  sheets  of  ordinary  sized  paper.     On  the  other 


TARIFFS    AND    TARIFF    SYSTEMS 

hand,  the  protective  tariff  of  Germany  is  divided 
into  nineteen  chapters,  contains  nearly  one  thousand 
numbers  or  rates,  and  occupies  over  thirty  quarto 
pages  of  printed  matter. 

51.  Contents  of  the  American  Tariff  Act. — 
The  first  tariff  act  of  the  United  States,  passed  on 
July  4,  1789,  comprised  six  sections  with  about 
eighty  different  rates  and  might  easily  be  printed  on 
three  sheets  of  ordinary  sized  paper.  Quite  in  con- 
trast with  this  is  the  present  tariff  law  enacted  in 
1897  and  known  as  the  "Dingley  Bill."  It  includes 
thirty-four  sections.  Section  one  is  subdivided  in- 
to schedules  lettered  from  A  to  N  (inclusive)  while 
succeeding  sections  relate  to  various  subjects  such 
as  the  list  of  articles  admitted  free  of  duty  (section 
two),  reciprocity,  etc.  Sections  one  and  two  con- 
tain 705  paragraphs.  The  schedules  contain  special 
classes  of  articles  such  as  "metals  and  manufac- 
tures of"  (C),  "wood  and  manufactures  of"  (D), 
etc.  The  arrangement  of  paragraphs  under  each 
schedule  is,  when  practical,  alphabetical.  For  ex- 
ample under  schedule  N  (sundries)  there  are  beads, 
braids,  brushes,  etc.  Besides  indexes  and  other  ex- 
planatory matter  the  act  comprises  about  eighty 
pages  of  printed  rflatter.  The  increased  complex- 
ity of  the  existing  law  is  due  in  a  large  measure  to 
the  growth  of  protection  in  the  United  States.  The 
general  character  of  the  act  may  be  shown  by  the 
following  table  of  contents. 


87 


COMMERCIAL    POLICIES 


Each    schedule    is    divided    into 
paragraphs,    consecutively     num- 
bered and  alphabetically  arranged 
SCHEDULES  (when    practical).       Each    para- 

graph contains  special  rates,  ad 
valorem  or  specific  or  a  combina- 
tion of  both. 


A.  Chemicals,      O  i  1  s       a  n  d 
Paints     Nos.      i  to   86  inclusive 

B.  Earths,     Earthenware    and 
Glassware    "      87  to  120        " 

C.  Metals    and    Manufactures 
of     "     121  to  193        " 

D.  Wood    and    Manufactures 
of    "     194  to  208        " 

E.  Sugar,  Molasses  and  Man- 
ufactures  of "    209  to  212        " 

r.     Tobacco  and  Manufactures 

of  "    213  to  217        " 

G.     Agricultural   Products   and 

Provisions   "     218  to  288        " 

H.    Spirits,    Wines    and    other 

Beverages "    289  to  301        " 

I.      Cotton  Manufactures "    302  to  322        " 

J.     Flax,   Hemp  and  Jute  and 

Manufactures  of "     3^3  to  347        " 

K.    Wool  and  Manufactures  of 

Wool "    348  to  383 

L.     Silks  and  Silk  Goods "    38410392 

M.    Pulp,  Papers  and  Books. .     "    39310407 

N.     Sundries "    408  to  463        " 

Free  List "    46410705        "     Sec.  2 

Reciprocity  and  Special  Sections,  Sections  3-34  (inclusive) 
Index  generally  added  in  special  editions 
Administrative  Act  generally  added  in  special  editions 
Index   to    Administrative   Act   generally   added   in   special 

editions 
Internal  Revenue  Law  generally  added  in  special  editions 
Index  to  Revenue  Law  generally  added  in  special  editions 

88 


TARIFFS    AND     TARIFF    SYSTEMS 

52.  The  Free  List. —  In  some  tariff  laws,  such 
as  the  revenue  tariff  law  of  Great  Britain,  certain 
articles  are  enumerated  as  dutiable  or  as  prohibited 
and  all  other  goods  are  allowed  entrance  free  of 
duty.  ]\Iany  of  the  European  tariff  laws  contain 
schedules  or  groups  in  which  are  to  be  found  not 
only  dutiable  or  prohibited  articles  but  also  articles 
which  are  entered  duty  free.  Other  tariff  acts  con- 
tain a  special  or  separate  "free  list"  and  stipulate  a 
certain  uniform  rate  of  duty  for  all  unenumerated 
articles.  This  is  a  feature  of  the  Canadian  and  the 
American  tariff  laws.  Section  six  of  the  latter  act 
states  "that  there  shall  be  levied,  collected  and  paid 
on  the  importation  of  all  raw  or  unmanufactured 
articles,  not  enumerated  or  provided  for  in  this  act, 
a  duty  of  ten  percentum  ad  valorem,  and  on  all  ar- 
ticles manufactured,  in  whole  or  in  part,  not  pro- 
vided for  in  this  act,  a  duty  of  twenty  per  centum 
ad  valorem."  When  imported  goods  are  composed 
of  different  kinds  of  dutiable  articles  which  cannot 
be  separated  it  is  customary  to  apply  the  rate  on  the 
material  having  the  highest  duty. 

53.  Tariff  Enactment  and  Administration. — 
The  enactment  and  administration  of  a  tariff  de- 
pends upon  the  political  character  and  constitution 
of  a  state.  They  usually  come  within  the  purview 
of  the  central  authority.  In  the  United  States  both 
tariff  enactment  and  administration  are  matters  of 
the  federal  government,  the  Constitution  providing 
that  Congress  shall  have  power  to  lay  and  collect 
taxes,  duties,  imposts  and  excises  and  to  make  all 
laws  which  shall  be  necessary  and  proper  for  carry- 

89 


COMMERCIAL     POLICIES 

ing  these  powers  into  effect.  In  states  lacking  po- 
litical unity,  however,  the  enactment  and  adminis- 
tration of  tariff  laws  are  sometimes  regulated  by 
reciprocal  arrangements  between  central  and  state 
or  local  authorities.  Thus  in  Germany  the  enact- 
ment of  tariff  laws  is,  according  to  the  Constitution, 
solely  a  matter  of  the  Empire,  while  the  collection 
and  administration  of  the  duties  are  left  to  the  sev- 
eral states  subject,  however,  to  Imperial  supervision. 
A  somewhat  similar  arrangement  is  in  vogue  in 
Austria-Hungary.  Some  states  have  nominally  the 
power  of  enacting  customs  tariff  laws  but  these 
laws  are  administered  by  an  international  board. 
This  is  the  situation  in  China.  The  finances  of 
Egypt  are  virtually  controlled  by  England  through 
an  English  financial  adviser  without  whose  concur- 
rence no  financial  legislation  can  be  enacted.  Ar- 
rangements somewhat  analogous  to  this  are  to  be 
found  in  several  backward  countries  such  as  Persia 
and  San  Domingo. 

54.  Territorial  Scope  of  Tariff  Laws. — Usually 
tariff  laws  are  co-extensive  with  the  political  boun- 
daries of  states — exclusive  of  their  colonies.  Thus 
the  tariff  law  of  Great  Britain  is  applicable  to  Eng- 
land, Ireland,  Scotland  and  Wales  but  not  to  Eng- 
lish colonies  which  have  special  tariff  acts  of  their 
own.  In  the  United  States  the  general  tariff  law 
applies  to  all  the  states  as  well  as  to  all  of  the  con- 
tinental and  some  of  the  insular  territories  of  the 
Union.  It  includes  Hawaii  and  Porto  Rico  but  not 
the  Philippines  and  minor  island  possessions.  In 
some  cases  tariff  laws  do  not  apply  to  all  the  con- 

90 


TARIFFS    AND     TARIFF    SYSTEMS 

tiguous  territory  of  a  state  and  in  other  cases  it  in- 
cludes foreign  contiguous  territory.  Thus  the  Ger- 
man customs  union  (Zollverein)  did  not  include  the 
free  cities  of  Hamburg  and  Bremen  until  1888  while 
Trieste  and  Fiume  bordering  on  the  Adriatic  were 
not  incorporated  into  the  Austro-Hungarian  cus- 
toms union  until  1891.  On  the  other  hand,  the 
Austrian  communities  of  Jungholz  and  Mittleberg 
and  the  independent  duchy  of  Luxemburg  are  eco- 
nomically so  dependent  upon  Germany  that  they 
have  been  incorporated  into  the  German  customs 
union,  while  for  a  similar  reason  the  independent 
principalities  of  Lichtenstein  and  Monaco  have  been 
included  in  the  Austro-Hungarian  and  French  cus- 
toms tariff  systems  respectively. 

55.  Revenue  Effect  of  Anticipated  Tariff 
Changes. —  Contemplated  changes  in  tariff  laws  in- 
fluence imports  which  are  large  in  view  of  a  prob- 
able rise  in  rates  as  was  the  case  in  the  United  States 
during  the  months  preceding  the  enactment  of  the 
high  tariff  laws  of  1890  and  1897  and  small  when 
existing  rates  are  likely  to  be  lowered,  a  condition 
existing  in  the  United  States  prior  to  the  enact- 
ment of  the  tariff  act  of  1894.  Such  conditions  are 
disturbing  to  business.  The  French  law  of  1897 
attempts  to  lessen  this  evil  by  temporarily  apply- 
ing the  new  rates  when  a  law  is  proposed  which 
raises  the  rates  of  duty  on  cereals,  wine,  animals 
and  fresh  meat.  Should  the  proposed  bill  fail  to 
become  a  law  the  excess  revenue  thus  collected  is 
refunded.  Spain,  Greece,  Italy  and  England  have 
somewhat  similar  regulations. 

91 


COMMERCIAL    POLICIES 

56.  General  or  Autonomous  Tariff  System.— 
In  modern  commercial  politics  there  are  three  prom- 
inent customs  tariff  systems — the  general  or  auton- 
omous, the  general  and  conventional,  and  the  maxi- 
mum and  minimum,  -^he  general  or  autonomous 
is  the  simplest  kind  of  a  tariff  and  consists  of  a 
single  list  of  customs  duties  applicable  to  the  goods 
of  all  countries  without  distinction.  Such  a  tariff 
system  is  solely  an  act  of  the  legislative  branch  of  a 
government.  It  takes  account  primarily  of  home 
industry  and  considers  foreign  commercial  relations 
only  when  the  latter  are  in  complete  harmony  with 
the  interests  of  domestic  producers.  Nations  hav- 
ing a  general  tariff  are  handicapped  in  developing 
their  foreign  commerce  as  the  system  precludes  the 
obtaining  of  trade  concessions  from  other  countries 
in  return  for  reciprocal  favors.  This  disadvantage 
coupled  with  the  increasing  competition  in  the  field 
of  international  trade  has  led  many  states  to  modify 
their  tariff  policy  in  recent  years.  The  general  tariff 
policy  has  been  in  vogue  m  the  United  States  from 
the  beginning  of  our  constitutional  history  although 
some  slight  modifications  have  been  made  since 
1890.  It  is  also  the  policy  in  use  in  many  European 
countries,  notably  in  Great  Britain,  Belgium,  Den- 
mark, Holland  and  Sweden,  as  well  as  in  most  of 
the  less  industrially  advanced  countries  including 
the  Central  and  South  American  states. 

57.  General  and  Conventional  Tariff  System. — 
In  this  system  a  general  tariff  is  usually  constructed 
and  then  conventions  are  made  with  some  countries 
granting  them  lower  rates  on  certain  articles  in  re- 

92 


TARIFFS    AND     TARIFF    SYSTEMS 

turn  for  equivalent  concessions.  In  a  general  tariff 
there  is  no  guarantee  against  frequent  changes  in  the 
rates  but  in  the  conventional  tariff  there  is  usually 
a  stipulation  that  rates  shall  remain  unchanged  or  at 
least  be  not  raised  during  a  certain  period.  Some- 
times the  general  tariff  rates  are  purposely  made 
rather  high  in  order  to  form  a  favorable  basis  for 
future  concessions.  The  rates  must  not,  however, 
be  too  high  owing  to  the  possibility  that  other  na- 
tions may  likewise  raise  their  own  rates  before  at- 
tempting to  negotiate,  or  regard  the  offered  conces- 
sions of  no  real  value  as  was  practically  the  case  in 
the  American  tariff  act  of  1897.  This  fact,  together 
with  the  disinclination  of  the  American  Senate  to 
reciprocate  even  under  such  conditions,  made  effect- 
ive conventional  arrangements  with  foreign  coun- 
tries impossible.  Germany's  tariff  policy  is  inter- 
esting in  this  connection.  In  1891  her  general 
tariff  was  modified  by  conventions  with  Austria- 
Hungary  and  other  countries  wherein  duties  on 
certain  articles  were  not  to  be  raised  above  a  certain 
point  before  December  31,  1903  Recently  a  new 
German  tariff  law  was  passed  which  continues  the 
general  and  conventional  system.  While  the  con- 
ventional arrangements  in  the  nineties,  however, 
had  fixed  a  maximum  rate  for  many  products  the 
present  law  maintains  a  minimum  rate  in  the  case 
of  certain  agricultural  products  The  general  and 
conventional  tariff  system  is  found  in  several 
European  countries  among  them  Austria-Hungary, 
Italy,  and  Servia  while  in  Asia  the  new  tariff  of 
Japan  belongs  in  this  category. 

93 


COMMERCIAL    POLICIES 

58.  Maximum  and  Minimum  Tariff  System. — 

This  system  differs  from  the  general  and  conven- 
tional plan  in  tw';o_  important  particulars.  In  the 
first  place  instead  of  having  two  rates  on  only  a  few 
articles,  as  is  usually  the  case  in  the  general  and 
conventional  tariff,  it  has  two  rates  on  most  of  the 
articles  on  which  duties  are  imposed  and  for  this 
/  reason  it  is  sometimes  called  the  double  or  multiple 
systeni.  In  the  second  place  the  minimum  schedule 
is  not  drawn  up  by  the  executive  departments  of  a 
government  as  is  the  conventional  usually  but  is 
framed  by  the  legislative  bodies  at  the  same  time 
that  the  maximum  schedule  is  jnade.  In  other 
words  the  legislative  power  fixes  two  rates  of  duties 
for  practically  all  articles  in  the  tariff.  These  two 
rates  register  the  limits  within  which  rates  must  be 
fixed  by  treaty.  This  system  is  not  without  its 
advantages.  It  tends  to  give  security  and  stability 
to  home  industries  since  domestic  producers  know 
within  what  limits  the  executive  part  of  the  govern- 
ment may  act  in  tariff  matters.  It  tends  also  to  re- 
lieve the  Executive  of  responsibility.  However, 
there  is  a  disadvantage  in  this  form  of  a  tariff  policy 
in  that  foreign  governments  know  beforehand  the 
limitations  of  the  country  employing  the  maximum 
and  minimum  system.  This  policy  has  been  adopted 
with  various  modifications  in  Spain,  France,  Russia, 
and  in  a  few  other  countries.  Spain  made  the  first 
move  in  this  respect.  Her  tariff  of  1877  contained 
two  columns  of  differing  rates  of  duties,  the  mini- 
mum rates  applying  to  those  treaty  countries  to 
which  she  has   guaranteed   most   favored   national 

94 


TARIFFS     AND     TARIFF    SYSTEMS 

treatment,  and  the  maximum  rates  to  all  other 
countries.  Soon  after  the  shortage  of  the  French 
wine  supply  due  to  the  destruction  of  the  vines  by 
the  phylloxera  induced  Spain  to  grant  France 
rates  in  many  instances  lower  than  those  contained 
in  her  minimum  tariff,  in  order  to  obtain  from 
France  special  favors  for  her  wine  interests.  Later 
other  modifications  of  her  minimum  rates  were 
made  in  favor  of  Germany,  Belgium,  Italy,  Swe- 
den and  Norway  and  Switzerland  and  since  all 
these  concessions  must  be  granted  to  all  countries 
which  were  guaranteed  most  favored  nation  treat- 
ment by  treaty  the  effect  was  a  general  lowering 
of  her  minimum  rates.  During  the  nineties  in  at- 
tempting to  remedy  this  unfavorable  situation  by 
abolishing  her  most  favored  nation  agreements  she 
became  involved  in  tariff  wars  with  other  countries. 
France  adopted  a  maximum  and  minimum  tariff 
system  in  1892  which  immediately  involved  her  in  a 
tariff  war  with  Switzerland  and  led  her  m  1895  to 
grant  the  latter  several  rates  which  were  lower  than 
those  contained  in  the  minimum  list.  As  she  was 
compelled  to  grant  these  concessions  to  all  favored 
nation  countries  the  general  effect  was  a  lowering 
of  her  minimum  rates.  France  like  Spain  has  dem- 
onstrated to  her  own  satisfaction  the  incompatibility 
of  the  maximum  and  minimum  system  and  the  most 
favored  nation  treaties  and  this  has  led  her  to  abolish 
the  latter,  as  far  as  possible,  and  negotiate  on  a  quid 
pro  quo  basis. 

Russia's  experience  with  the  maximum  and  mini- 
mum tariff  system  is  not  without  interest.     In  1893 

95 


C  O  M  M  E  R  C  LA  L    POLICIES 

she  adopted  with  slight  modifications  the  existing 
rates  of  the  tariff  act  of  1891  as  her  minimum  rates 
while  her  maximum  rates  were  to  be  an  added  thirty 
per  cent,  for  imports  of  manufactured  goods,  and 
twenty  per  cent,  for  partially  manufactured  goods 
while  in  general  no  additional  rates  were  to  be  levied 
on  the  imports  of  raw  materials.  She  became  in- 
volved in  tariff  troubles  with  other  countries,  the 
result  being  that  she  really  ended  by  having  three 
tariffs — a  minimum  one  applicable  in  general  to 
most  favored  nation  countries,  a  conventional  tariff 
offering  exceptionally  low  rates  to  a  few  countries, 
notably  to  Germany,  while  her  maximum  tariff  as- 
sumed more  the  nature  of  a  war  tariff.  One  of  the 
most  recent  tariff  laws,  that  of  Canada,  besides  the 
maximum  and  minimum  schedule,  provides  for  a 
third  rate  on  British  imports.  A  discussion  of  such 
preferential  rates  belongs  to  a  succeeding  chapter. 

BIBLIOGRAPHY 

A.  Same  as  bibliography  for  chapter  V.  Consult  es- 
pecially Modern  Tariff  Systems  (with  bibliography)  in 
]\Ion.  Sum.  Com.  and  Fin.  for  Feb.  '02  and  Mar.  '04. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  What  were  the  tariff  relations  between  the  United 
States  and  Porto  Rico  during  the  year  following  the 
Spanish-American  War?  What  change  has  since  been 
made?  Were  the  reasons  for  the  change  political  or 
economic? 

2.  What  are  the  existing  tariff  relations  between  the 
United  States  and  the  Philippines?  What  do  President 
Roosevelt  and  Secretary  Taf    recommend?     Why? 

3.  What  control  has  the  United  States  over  the  finances 

96 


TARIFFS    AND    TARIFF    SYSTEMS 

of  San  Domingo?    Is  it  a  bad  precedent?    (Executive  E. 
Confidential.  59th  Congress,  2nd  session). 

4.  An  American  writer  attempts  to  prove  that  the  tariff 
of  1890  was  more  of  a  free  trade  law  than  the  tariff  act 
of  1883  because  the  free  Hst  of  the  former  contained  more 
articles  than  the  free  list  of  the  latter.  Wherein  lies  the 
fallacy  of  such  a  presentation? 

5.  There  is  an  exception  to  the  statement  in  the  text 
that  the  Porto  Rican  tariff  is  the  same  as  the  American 
law.  An  import  duty  is  levied  on  coffee  in  Porto  Rico 
and  it  is  on  the  free  list  in  the  American  tariff  law.  How 
do  you  account  for  this? 


97 


CHAPTER  VIII. 

CUSTOMS 

AD    VALOREM,    SPECIFIC    AND    DIFFERENTIAL 

DUTIES 

59.  Introduction. —  As  already  stated  there  are 
two  kinds  of  customs  duties,  ad  valorem  and  specific. 
The  former  ar^TIutTes  based  on  vahies  and  meas- 
ured in  percentages.  Thus  in  the  American  tariff 
act  we  find  that  pearls  in  their  natural  state  pay  a 
ten  percentum  ad  valorem  duty  when  imported 
which  means  that  for  every  dollar's  worth  brought 
into  the  country  the  government  exacts  a  payment 
of  ten  cents.  Specific  duties  are  thqse_Jbased^  upon 
a  unit  of  weight  or  measure  and  are  measuredjin 
payments  per  pound,  ton,  kilogram,  dozen,,  quart, 
liter,  etc.  In  the  American  tariff  law,  for  example, 
lard  pays  an  import  duty  of  two  cents  per  proof 
gallon.  Sometimes  there  is  a  combination  of  both 
kinds  of  duties  which  are  generally  spoken  of  as 
"compound''  duTies."  This  is  especially  common  in 
the  American  law.  Saccharine,  for  example,  pays 
an  import  duty  of  one  dollar  and  fifty  cents  per 
pound  and  ten  percentum  ad  valorem. 

All  tariff  law^s  do  not  have  the  same  general  char- 
acter. The  most  common  kind,  however,  is  a  tariff 
in  which  specific  import  duties  predominate.  This 
characterizes  the  tariff  laws  of  most  of  the  European 

98 


AD    VALOREM     DUTIES 

states,  many  of  the  Central  and  South  American 
countries,  inckiding  Mexico,  and  that  of  the  South 
African  Customs  Union.  The  next  most  common 
class  of  customs  tariffs  is  that  in  which  ad  valorem 
import  duties  largely  prevail.  In  this  category  be- 
long many  of  the  South  American  states,  Canada, 
Newfoundland,  New  Zealand,  Japan,  Egypt,  Mor- 
occo, and  Bulgaria.  The  United  States  really  be- 
longs in  this  class  although  the  large  number  of 
specific  and  compound  duties  almost  places  this 
country  in  a  class  by  itself.^  Several  minor  states 
have  a  general  import  and  export  rate  which  is 
largely  or  entirely  ad  valorem.  In  this  class  belong 
the  Malay  States,  Dutch  East  Indies,  British -North 
Borneo,  Cyprus,  Sudan  and  Turkey.  The  last  two 
have  each  a  general  eight  per  cent,  import  and  a  one 
per  cent  export  duty.  Likewise  some  of  the  smaller 
states  including  Persia,  Servia  and  PYench  Indo 
China  have  export  and  import  duties  in  which  speci- 
fic duties  predominate, 

60.  Advantages  and  Disadvantages  of  Ad  Val- 
orem Duties. —  The  principal  advantage  of  ad  va- 
lorem rates  is  their  adaptability  to  changing  market 
conditions.  The  amount  of  the  duty  increases  or 
diminishes  with  the  rise  or  fall  in  the  price  of  the 
imported  article.  Likewise  the  finer  or  higher 
priced  goods  pay  proportionally  the  same  as   the 

"The  complexity  of  the  American  tariff  law  is  shown  from  the  fact 
that  there  are  approximately  6500  ad  valorem,  3000  specific  and  1600 
compound  rates  besides  nearly  2000  enumerated  rates  in  the  free  list. 
Exclusive  of  the  latter,  therefore,  there  are  over  iiooo  different  rates 
of  duty  in  the  present  law.  (See  U.  S.  Tariff  Law  published  in  special 
consular  reports.) 

99 


COMMERCIAL    POLICIES 

lower  grades.  The  duty  is  thus  equitable  when 
properly  applied.  There  are,  however,  many  serious 
disadvantages  in  the  use  of  ad  valorem  rates.  They 
are  difficult  and  expensive  to  administer  both  be- 
cause of  the  temptations  of  importers  to  undervalue 
their  goods  in  order  to  escape  the  full  payment  of 
duties  and  because  of  the  large  number  of  expert 
officials  required  to  determine  properly  the  various 
rates  of  duties.  Many  opportunities  for  fraudulent 
practices  are  open  not  only  to  importers  but  also  to 
government  officials  and  although  very  severe  penal- 
ties have  been  enacted  to  overcome  these  evils  they 
have  not  proven  entirely  effective.  One  of  the  diffi- 
cultie&.in  applying  ad  valorem  duties  is  the  determin- 
ing of  a  correct  value  basis  as  expressed  in  price. 
Should  the  latter  be  the  price  at  the  place  of  pur- 
chase, at  the  port  of  departure  or  at  the  port  of 
entry?  Should  the  price  include  storage,  packing 
or  transportation  costs?  Should  it  be  the  wholesale 
or  retail  price?  The  American  Customs  Adminis- 
tration Act  stipulates  that  ad  valorem  rates  "shall  be 
assessed  upon  the  actual  market  value  or  wholesale 
price  of  such  merchandise  as  bought  and  sold  in 
usual  wholesale  quantities,  at  the  time  of  exporta- 
tion to  the  United  States,  in  the  principal  markets 
of  the  country  from  whence  imported,  and  in  the 
condition  in  which  such  merchandise  is  there  bought 
and  sold  for  exportation  to  the  United  States,  or 
consigned  to  the  United  States  for  sale,  including 
the  value  of  all  cartons,  cases,  crates,  boxes,  sacks, 
and  coverings  of  any  kind,  and  all  other  costs, 
charges,  and  expenses  incident  to  placing  the  mer- 


AD     VALOREM     DUTIES 

chandise  in  condition  packed  ready  for  shipment  to 
the  United  States,  and  if  there  be  used  for  covering 
or  holding  imported  merchandise,  whether  dutiable 
or  free,  any  unusual  article  or  form  designed  for 
use  otherwise  than  in  the  bona  fide  transportation 
of  such  merchandise  to  the  United  States,  additional 
duty  shall  be  levied  and  collected  upon  such  material 
or  article  at  the  rate  to  which  the  same  would  be 
subject  if  separately  imported."  (Sec.  19). 

61.  Advantages  and  Disadvantages  of  Specific 
Duties. —  The  chief  advantage  of  specific  duties 
rests  in  the  simplicity  and  cheapness  of  their  admin- 
istration. Customs  officials  have,  for  the  most  part, 
only  to  weigh,  measirre  br'  'c(>unt  the*  nit^rchandise 
crossing  the  national  boundaries- — a  procedure  in- 
volving but  little  techrioal  sk'll,  expense  br_  oppor- 
tunity for  fraudulent  practices  and  aiding  commerce 
by  the  speed  of  its  execution.  The  principal  dis- 
advantage of  specific  duties  is  that  they  are  inequit- 
able.  Coarser  and  cheaper  goods  are  generally 
taxed  proportionally  higher  than  the  finer  and  more 
expensive  articles,  while  the  opposite  rule  should 
prevail.  For  example  if  imported  cotton  cloth  were 
taxed  ten  cents  a  yard  regardless  of  quality  the 
cloth  worth  five  cents  per  yard  would  be  paying  a 
duty  equivalent  to  two  hundred  per  cent,  while  the 
material  worth  fifty  cents  per  yard  would  escape 
with  a  duty  of  only  twenty  per  cent.  This  inequal- 
ity is  partially  obviated  by  arranging  merchandise  in 
groups  based  upon  the  degree  of  manufacture,  the 
fineness  of  the  goods  or  upon  some  other  common 
basis  and  applying  special  rates  to  particular  groups. 

lOI 


COMMERCIAL    POLICIES 

Some  such  general  method  of  grouping  is  charac- 
teristic of  nearly  all  customs  tariffs. 

An  important  point  to  consider  in  regard  to  spe- 
cific duties  is  whether  they  are  leviedon  net  or  gross 
weight  or  measure.  The  duty  ought  naturally  to 
be  based  upon  the  article  exclusive  of  the  packing 
but  as  the  removal  of  the  latter  for  the  purpose  of 
obtaining  net  weight  or  measure  would  often  be  a 
serious  damage  to  the  goods  or  would  delay  com- 
mercial transactions,  many  tariff  laws  make  a  legal 
allowance  known  as  tare,  on  various  kinds  of  ar- 
ticles. 

62.  General  Method  of  Tariff  Administration. — 
For  the  'purpose  o£  .gu^ardin.s^-  general  interest,  es- 
pecially the  hnan'cial  iriterests,  of  the  government 
and  the  prOte^.t^d'.'ir^tbrei;t*i;.,  of  producers,  various 
methods  of  tariff  administration  have  been  adopted 
in  different  countries  to  carry  out  the  purposes  of 
the  law  regarding  the  levying  of  correct  duties,  the 
settlement  of  disputes  regarding  customs  matters 
and  the  like.  In  the  United  States  tariff  adminis- 
tration rests  primarily  with  the  Treasury  Depart- 
ment and  secondarily  with  the  State  Department. 
The  courts  also  play  an  important  role.  All  im- 
ported goods  exceeding  one  hundred  dollars  in 
value  must  be  accompanied  by  an  invoice  sworn 
to  before  an  American  consul  at  the  place  of  ship- 
ment. These  invoices  are  usually  made  out  in  trip- 
licates, one  copy  being  kept  on  file  in  the  consulate, 
one  being  sent  to  the  collector  at  the  port  of  entry 
in  the  United  States,  and  the  third  being  given  to 
the  exporter  for  transmittal  to  the  importer  or  con- 


AD    VALOREM     DUTIES 

signee.  If  goods  are  destined  for  an  interior  point, 
a  fourth  certified  invoice  is  issued  to  the  shipper 
who  in  turn  sends  the  invoice  he  receives  from  the 
consul  to  the  merchant  to  whom  he  has  sold  the 
goods.  The  invoice,  together  with  any  information 
obtained  from  other  sources  such  as  trade  reports, 
government  statistics  and  American  treasury  ex- 
perts stationed  in  foreign  countries,  furnishes  the 
basis  of  valuation  for  purposes  of  levying  the 
duty.  The  value  of  all  goods  imported  in  the 
United  States  is  determined,  in  the  first  place,  by  a 
local  appraiser.  In  case  of  dissatisfaction  either  on 
the  part  of  the  collector  of  customs  or  of  the  im- 
porter, appeal  may  be  made  to  a  general  appraiser 
and  finally  to  a  board  of  three  general  appraisers 
whose  decision  "shall  be  final  and  conclusive  as  to 
the  dutiable  value  of  such  merchandise  against  all 
parties  interested  therein."'  As  regard  the  rate  and 
amount  of  duties  the  decision  rests,  in  the  first  in- 
stance, with  the  collector  of  customs.  In  case  of 
dissatisfaction  on  the  part  of  the  importer  or  con- 
signee with  his  conclusion  the  facts  may  be  referred 
to  a  board  of  three  general  appraisers.  From  its 
decision  appeal  may  be  made  either  by  the  govern- 
ment or  by  the  importer  to  the  circuit  court  of  the 
United  States  within  the  district  in  which  the  matter 
arises  "for  a  review  of  the  questions  of  law  and  fact 
involved  in  such  decision."  This  conclusion  is  final 
unless  the  court  or  judge  "shall  be  of  the  opinion 
that  the  question  involved  is  of  such  importance  as 
to  require  a  review  of  such  decision  by  the  Supreme 
Court  of  the  United  States." 

103 


COMMERCIAL    POLICIES 

Some  countries,  notably  Germany,  Spain  and 
Austria  have  public  mercantile  commissions  which 
render  assistance,  in  an  advisory  way,  in  matters  of 
tariff  administration,  especially  as  regards  dutiable 
values.  Appointments  to  these  commissions  are 
usually  made  by  the  Minister  of  Commerce  upon  the 
recommendations  of  chambers  of  commerce. 

63.  Payment  of  Customs  Duties. —  As  a  general 
rule  the  standard  money  of  a  country  is  receivable 
in  payment  for  its  customs  duties.  Some  states, 
however,  having  depreciated  currencies,  require 
these  taxes  to  be  paid  in  gold.  One  result  of  this 
is  virtually  to  raise  existing  imposts,  a  condition 
which  has  brought  ineffectual  remonstrances  especi- 
ally from  countries  having  commercial  treaties  with 
the  offending  nation.  When  Russia  in  1877  and 
Austria-Hungary  in  1878  enacted  that  imposts  be 
paid  in  gold  the  effect  was  to  enhance  the  prevailing 
rates  of  duty  thirty-three  and  fifteen  per  cent,  re- 
spectively. Another  result  of  requiring  gold  pay- 
ments in  depreciated  currency  countries  is  to  in- 
crease the  gold  reserve,  a  situation  especially  ad- 
vantageous for  countries  having  interest  to  pay  on 
foreign  loans.  This  was  practically  the  situation 
in  the  United  States  as  a  result  of  the  Civil  War. 
At  that  time  large  amounts  of  depreciated  paper 
money  were  issued  which  were  receivable  in  payment 
for  all  public  dues  except  duties  on  imposts  and  of 
all  claims  against  the  United  States  except  interest 
on  the  public  debt.  This  was  virtually  a  require- 
ment that  import  duties  be  paid  in  coin.  However, 
in  1879  when  the  so-called  "greenbacks"  or  United 

104 


AD     VALOREM     DUTIES 

States  notes  came  to  a  par  with  gold  the  require- 
ment of  coin  payment  was  revoked  by  an  order  of 
the  Secretary  of  the  Treasury  so  that  at  the  present 
time  not  only  gold  coins  and  silver  dollars  but  also 
"United  States  demand  notes,  United  States  Treas- 
ury notes,  and  certificates  of  deposit  of  gold  coin 
and  bullion  and  of  standard  silver  dollars  of  the 
United  States  are  receivable  for  duties  at  their  nom- 
inal value  in  unlimited  amounts." 

64.  Discriminating  Duties  on  Vessels  and  their 
Cargoes. — Duties  of  this  kind  are  such  as  discrimi- 
nate in  favor  of  domestic  vessels  and  their  cargoes 
by  levying  a  higher  rate  of  duty  upon  foreign  than 
upon  native  ships  and  cargoes.  The  Navigation  Act 
of  Cromwell  aimed  to  foster  the  carrying  trade  of 
England  by  forbidding  the  importation  of  mer- 
chandise except  in  English  vessels  or  in  ships  be- 
longing to  the  exporting  country,  but  later  this  pro- 
hibition was  replaced  by  discriminating  duties. 
Such  discriminations  formed  a  prominent  feature 
of  the  Mercantile  System  but  have  largely  lost  their 
importance  in  existing  commercial  politics.  France 
however,  and  in  a  less  degree  Spain,  have  compre- 
hensive systems  of  surtaxes  upon  goods  indirectly 
imported.  Somewhat  analogous  to  this  are  the  tariff 
reductions  which  some  states  make  on  goods  im- 
ported by  water  rather  than  by  land.  For  instance 
tea  and  cofifee  imported  into  Austria-Hungary  at 
the  ports  of  Trieste  and  Fiume  pay  a  lower  rate 
than  when  imported  at  the  land  frontier,  the  pur- 
pose of  course  being  to  divert  traffic  from  the  north- 
ern ports  of  Europe. 


COMMERCIAL    POLICIES 

In  the  United  States  one  of  the  first  acts  of  the 
government  under  the  Constitution  was  to  pass  a 
discriminating  tonnage  law.  In  the  present  Ameri- 
can tariff  act  a  discriminating  duty  of  ten  per  cent, 
in  addition  to  the  duties  imposed  by  law,  is  levied 
upon  merchandise  imported  into  the  United  States 
in  foreign  vessels  but  this  law  is  unimportant  since 
it  does  not  apply  to  the  merchandise  imported  in 
foreign  vessels  entitled  by  treaty  to  be  entered  in 
the  ports  of  the  United  States  upon  the  payment  of 
the  same  duties  as  in  the  case  of  American  vessels 
(Section  22).  Likewise  imported  merchandise  is 
subject  to  forfeiture  unless  entered  in  vessels  of  the 
United  States  or  in  such  foreign  vessels  as  belong 
to  citizens  or  subjects  of  that  country  of  which  the 
goods  are  the  growth,  production  or  manufacture 
or  from  which  such  goods  can  only  be  or  most  usu- 
ally are  first  shipped  (Section  23  of  Tariff  Act  of 
1897).  This  provision  has  but  little  value  being  in- 
applicable to  the  vessels  or  goods  imported  in  vessels 
of  a  foreign  nation  which  does  not  maintain  a  simi- 
lar regulation  against  vessels  of  the  United  States 
(Section  24).  A  provision  of  the  law,  however, 
should  be  noted  which  stipulates  that  an  additional 
duty  of  ten  per  cent,  must  be  paid  on  goods  "which, 
being  the  production  or  manufacture  of  any  foreign 
country  not  contiguous  to  the  United  States,  shall 
come  into  the  United  States  from  such  contiguous 
country."  The  purpose  of  this  law  is  to  divert  from 
Canadian  railroads  goods  imported  into  Canada  but 
destined  for  consumption  in  the  United  States. 


106 


AD     VALOREM     DUTIES 

65.  Interstate  Preferential  Duties. —  Preferen- 
tial duties  may  have  for  their  purpose  the  develop- 
ment or  maintenance  of  closer  economic  or  political 
relations  between  certain  states.  They  may  be  em- 
ployed when  two  countries  are  politically  united  but 
the  peculiar  character  of  their  economic  develop- 
ment prohibits  entire  freedom  of  trade  as  was  the 
case,  until  recently,  in  Norway  and  Sweden.  Some- 
times they  are  resorted  to  where  free  trade  between 
two  states  or  territories  is  contemplated  but  can 
only  be  brought  about  gradually  without  disturbing 
industrial  conditions.  Thus  free  trade  between  the 
United  States  and  Porto  Rico  and  also  between 
Russia  and  Finland  was  preceded  by  moderate  in- 
terstate tarifif  reductions.  Likewise  two  or  more 
politically  independent  states  may  have  such  close 
commercial  relations  that  complete  economic  separ- 
ation would  lessen  their  industrial  independence. 
This  is  the  explanation  for  the  existing  preferential 
customs  duties  between  Spain  and  Portugal.  Fin- 
ally the  best  example  of  interstate  preferential  du- 
ties exists  in  the  so-called  customs  union  or  Zoll- 
verein  in  which  several  independent  states  unite  up- 
on a  basis  of  free  trade  among  themselvs,  and  a 
common  customs  tarifif  for  commercial  intercourse 
with  foreign  countries.  The  most  conspicuous  ex- 
ample of  such  a  union  was  the  German  Zollverein 
w^hich  was  formed  in  1834.  Such  federated  or  con- 
federated states  as  Austria-Hungary,  Australia, 
South  Africa,  Germany,  Dominion  of  Canada  and 
the  United  States  are  in  reality  great  tarifif  unions. 
The  American  Constitution  gives  Congress  the  right 

107 


COMMERCIAL    POLICIES 

to  regulate  commerce  with  foreign  nations  and 
among  the  several  states,  the  only  restriction  being 
that  "all  duties,  imposts  and  excises  shall  be  uni- 
form throughout  the  United  States."  The  other 
customs  unions  are  organized  on  much  the  same 
basis  as  in  the  American  union.  Such  a  develop- 
ment presupposes  on  the  one  hand  a  partial  loss  of 
individual  state  sovereignty  and  on  the  other  hand 
the  growth  of  centralized  political  authority. 

66.  Colonial  Preferential  Duties. — For  the  pur- 
pose of  fostering  commercial  and  political  relations 
between  independent  states  and  their  colonies  prefer- 
ential customs  and  tonnage  duties  were  universally 
applied  during  the  colonization  period  which  fol- 
lowed in  the  wake  of  the  great  discoveries.  Spain 
held  to  this  policy  until  all  her  colonies  were  lost 
and  Holland  governed  her  East  Indian  possessions 
upon  a  preferential  basis  until  1872.  France  has  in 
recent  years  resorted  to  a  very  comprehensive  plan 
of  granting  more  favorable  tariff  rates  on  colonial 
than  on  foreign  imports.  England's  policy  during 
the  sixteenth  and  seventeenth  centuries  was  much 
the  same  as  that  of  other  Europan  colonial  powers 
excepting  that  it  was  not  so  vigorously  applied.  Dur- 
ing the  first  half  of  the  nineteenth  century,  however, 
her  colonial  preferential  duties  were  abolished  and 
trade  with  her  colonies  has  been  since  then  open 
to  other  countries  upon  the  same  basis  as  that  en- 
joyed by  the  mother  country.  In  recent  years,  how- 
ever, intense  international  competition  and  the 
growth  of  protection  not  only  in  foreign  countries 
but  also  in  British  colonies  has  threatened  England's 

108 


AD     VALOREM     DUTIES 

commercial  supremacy  and  has  evoked  an  agitation 
favorable  to  preferential  customs  duties  between 
Great  Britain  and  her  colonies.  In  fact  some  of 
the  latter,  notably  Canada,  South  Africa,  and  New 
Zealand  have  already  embarked  upon  the  plan  and 
England  is  considering  whether  she  can  recipro- 
cate. The  leader  of  the  movement  is  ]\Ir.  Joseph 
Chamberlain.  The  United  States  in  its  recently  ac- 
quired colonies  inaugurated  the  policy  of  preferen- 
tial treatment.  In  the  case  of  Porto  Rico  this  has 
developed  into  free  trade. 

67.  Countervailing  Duties. — Some  countries  pay 
premiums  or  bounties  to  domestic  producers  on  the 
exportation  of  certain  products.  The  effect  in  many 
instances  is  to  discourage  the  production  of  such 
articles  in  the  importing  country.  If  the  latter 
maintain  a  protective  import  duty  it  may  be  ren- 
dered ineffective  by  such  an  export  bounty.  Until 
recently  there  have  been  export  bounties  on  beet 
sugar  in  many  European  countries.  These  have 
been  offset  in  the  United  States  and  in  British  In- 
dia by  countervailing  duties  the  purpose  being  to 
protect  the  domestic  sugar  producers.  Section  five 
of  the  American  tariff  act  states  "that  whenever  any 
country,  dependency,  or  colony  shall  pay  or  bestow, 
directly  or  indirectly,  any  bounty  or  grant  upon  the 
exportation  of  any  article  or  merchandise  from  such 
country,  dependency  or  colony,  and  such  article  or 
merchandise  is  dutiable  under  the  provisions  of  this 
act,  then  upon  the  importation  of  any  such  article 
or  merchandise  into   the   United  States  .  .  .  there 

109 


COMMERCIAL    POLICIES 

shall  be  levied  and  paid  ....  an  additional  duty 
equal  to  the  net  amount  of  such  bounty." 

68.  Retaliatory  Duties. — Retaliatory  duties  are 
rates  higher  than  those  contained  in  the  regular  tariff 
and  are  levied  in  exceptional  cases  upon  goods  im- 
ported from  certain  countries.  They  may  be  em- 
ployed because  one  nation  objects  to  what  it  regards 
an  unreasonable  tariff  law  of  another  country,  as  was 
the  case  in  the  tariff  war  between  Austria-Hungary 
and  Roumania  (1886- 1893),  the  former  nation  ob- 
jecting to  the  exceptionally  high  tariff  of  the  latter. 
Sometimes  such  duties  are  applied  because  one  na- 
tion considers  that  other  countries  have  been  treated 
more  favorably  than  itself.  This  was  the  reason 
for  the  Russian-German  tariff  war  (1893-1894), 
Russia  being  the  aggrieved  party.  Again  retalia- 
tory duties  have  been  used  after  a  commercial  treaty 
has  lapsed  and  attempts  to  negotiate  a  new  one  have 
resulted  in  failure  owing  to  unreasonable  demands 
or  treaty  disinclination  of  one  of  the  interested  par- 
ties. In  this  category  belong  the  tariff  wars  be- 
tween France  and  Italy  (1888-1892),  France  and 
Switzerland  (1893-1895),  and  Germany  and  Spain 
(1894-1895). 

The  power  of  applying  retaliatory  duties  is  gen- 
erally placed,  by  legislative  enactment,  in  the  hands 
of  the  Executive.  Section  five  of  the  American 
law  of  March  3,  1891,  prescribes  that  in  case  a  for- 
eign country  unjustly  discriminates  against  Ameri- 
can products,  the  President  "may  direct  that  such 
products  of  such  foreign  states  so  discriminating 
against  any  product  of  the  United  States  as  he  may 


AD    VALOREM     DUTIES 

deem  proper  shall  be  excluded  from  importation  to 
the  United  States."  Similar  regulations  exist  in 
many  other  countries  but  generally  the  power  of  the 
Executive  is  not  so  extensive  as  in  the  American 
law,  often  being  shared  by  one  or  both  of  the  legis- 
lative houses  or  limited  as  to  the  height  of  the  ad- 
ditional duties  that  may  be  levied.  The  German 
law,  which  may  be  taken  as  a  type,  reads  as  follows : 
"Goods  proceeding  from  countries  that  treat  goods 
or  ships  of  German  origin  less  favorably  than  those 
of  other  countries,  may  in  so  far  as  existing  treaties 
are  not  thereby  violated,  be  burdened  with  a  surtax 
ranging  up  to  one  hundred  per  cent,  of  the  tariff 
duty  imposed  on  such  goods,  and  goods  free  of 
duty  may,  in  virtue  of  a  tariff  made  under  the  same 
conditions,  be  burdened  with  a  duty  up  to  twenty 
per  cent,  ad  valorem.  The  levying  of  any  such  sur- 
tax will  be  enforced  by  an  Imperial  order  after  the 
consent  of  the  Bundesrath  has  been  obtained  to  it. 
The  Imperial  order  is  to  be  communicated  at  once 
to  the  Reichstag,  or  if  the  Reichstag  be  not  in  ses- 
sion, when  it  next  meets.  The  same  shall  no  longer 
be  enforced  when  not  approved  by  the  Reichstag." 

BIBLIOGRAPHY 

A.  Same  as  chapters  V.,  VI.,  and  VII.;  consult  also 
Chapter   XVII. 

B.  Andrews,  Laws  relating  to  Customs ;  Brit.  Pari. 
Rep.  (Fiscal  Advantages,  1895  C.  7895;  TarifT  Wars  be- 
tween certain  European  States  1904,  Cd.  1938)  ;  Treas. 
Dept.  Reports  (especially  (i)  **Cus.  Reg.  of  U.  S.,  (2) 
Digest  of  Decisions  of  Treas.  Dept.  (Customs)  and  Board 
of  U.  S.  General  Appraisers,  1898  to  date,  (3)  various  re- 
ports of  Div.  of  Customs   (Treas.  Dept.)  ;  **Customs  Ad- 

III 


COMMERCIAL    POLICIES 

ministrative  Act  of  June  lO,  1890  as  amended  by  Act  of 
July  24,  1897  (R.  S.  of  U.  S. ;  also  as  appendix  to  U.  S. 
Tariff  Law,  obtained  gratis  from  Treas.  Dept.)- 

C.  Diet,  and  encyc.  as  in  Ch.  I.  (especially  *"Revenue 
Laws"  in  Am.  and  Eng.  Encyc  Law.)  ;  Am.  Econ.  Assoc, 
Seventeenth  Annual  Meeting  pp.  80-146;  Poole's  Index; 
Schriften  des  Vereins  fur  Social  politic,  vol.  XLIX.,  L., 
XC,  and  XCI. 

D.  Ashley's  Tariff  Problem ;  Bolles'  Fin.  Hist,  of  U.  S., 
ch.  IX. ;  *Carr's  Judicial  Interpretation  of  Tariffs ;  Cohn's 
Handels ;  ^Dietzel's  Retaliatory  Duties ;  Fisk's  Middle 
European  Tariff  Union  (with  bibliography)  ;  *Goss'  Tariff 
Admin,  of  U.  S. ;  Grunzel's  Handelsp ;  Money's  Elem.  of 
Fiscal  Problem ;  Smart's  Return  to  Protection. 

E.  Goodnow,  F.  J.,  Collection  of  Customs  Duties  in 
U.  S.  J.  Pol.  Sci.  Q.,  I.,  36,  1886;  Hamlin,  C.  S.,  The  Cus- 
toms Administration  Act,  N.  Am.  R.,  CLVIII.,  222,  1893; 
de  Molinari,  G.,  Middle  Europ.  Tariff  Union,  Gunton's 
M.,  XII.,  38,  1896-7;  Washburne,  A.  H.,  Scope  of  a  Per- 
manent Tariff  Commission,  Forum  Ap-Je,  1903 ;  West,  A., 
British  Customs  Regulations,  Nineteenth  Cent.,  XLIL, 
636,  1897;  Whitehouse,  R.,  Austria  and  Pan- Americanism, 
Atlan.,  Je.  1902 ;  Willis,  H.  P.,  Reciprocity  with  Germany, 
J.  Pol.  Econ.  June- July.  1907. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  Suppose  the  duty  on  certain  goods  imported  into  the 
United  States  exceeds  the  value  of  the  goods  plus  the  bond 
guaranteeing  the  payment  of  the  duty  and  the  goods  and 
bond  are  sacrificed ;  does  this  free  the  importer  from  lia- 
bility?    (U.  S.  V.  Cobb,  II  Fed.  Rep.  76). 

2.  Suppose  the  goods  are  accidentally  destroyed  after 
importation,  is  the  importer  relieved  thereby  from  the 
payment  of  duty?  (Wolfe  v.  Howard  Ins.  Co.  i  Sandf. 
(N.  Y.)  124,  affirmed  7  N.  Y.  583;  Ferry  v.  U.  S.  (C.  C. 
A.)  85  Fed.  Rep.  550. 

3.  May  an  import  duty  be  levied  upon  merchandise 
shipped  from  one  domestic  port  to  another  when  the  ves- 

112 


AD    VALOREM     DUTIES 

sel  has  touched  an  intermediate  foreign  port?     (Am.  and 
Eng.  Encyc.  Law,  XXIV.,  p.  892). 

4.  Customs  duties  are  levied  in  the  United  States  only 
on  goods  imported  from  foreign  countries.  Are  the  Phil- 
ippines and  Porto  kico  foreign  countries?  If  not  may  we 
levy  duties  on  goods  imported  from  thence?  The  Consti- 
tution states  that  "all  duties,  imposts  and  excises  shall  be 
uniform  throughout  the  United  States."  Are  the  Phil- 
ippines and  Porto  Rico  a  part  of  the  United  States  and  if 
so  must  not  the  same  rate  of  import  duties  be  applied  to 
them  that  are  collected  in  the  United  States  and  must  there 
not  be  free  trade  between  them  and  the  United  States? 
Corxsult  the  fol :  De  Lima  v  Bidwell,  182  U.  S.  243 ; 
Dooley   v.    U.    S.,    182    U.    S.,   222;   Armstrong   v.   U.    S., 

182,  U.    S.    243;    Goetze   v.    U.    S.,    182,    U.    S.,    221,    re- 
versing 103  Fed.  Rep.  "^2 ;  Fourteen  Diamond  Rings  v.  U.  S., 

183,  U.  S.,  176;  Downes  v.  Bidwell,  182,  U.  S.,  244.     See 
also  Willoughby's   Amer.    Con.   System   Chapters   X.-XIV. 

5.  Estimate  the  loss  of  revenue  to  the  United  States 
government  for  any  one  year  on  the  supposition  that  im- 
ported goods  paying  an  ad  valorem  rate  of  duty  are  under- 
valued fifty  per  cent.     (Statis.  Abs.  of  U.  S.). 

6.  Are  there  any  provisions  in  American  law  regard- 
ing retaliation  besides  those  mentioned  in  the  text?  (See 
Tariff  Act  of  1897). 

7.  What  is  the  meaning  of  Pan-Americanism?  Is 
there  any  likelihood  of  an  economic  union  of  the  States  of 
North  and  South  America?  Since  the  independence  of 
the  South  American  states  how  has  their  trade  with  the 
United  States  increased  as  compared  with  the  increase  of 
the  foreign  commerce  of  the  United  States,  (a)  with  the 
world,  (b)  with  Europe  and  (c)  with  Great  Britain?  (An- 
nual volume  on  Commerce  and  Navi-ation;  World's  W. 
Ja.  '03;  N.  Am.  R.,  Feb.  '02). 

8.  What  is  the  character  of  modern  smuggling? 
(Forum  II.,  69,  1886). 

9.  What  are  the  arguments  in  favor  of  a  British  pref- 
erential   tariff?     (Ashley's    Tariff     Problem).     What    are 

8  113 


COMMERCIAL    POLICIES 

the  arguments  against?     (Money's  Elem.  of  Fiscal  Prob- 
lem; Smart's  Return  to  Protection). 

10.  What  has  been  the  efifect  of  the  Canadian  pref- 
erential tariff  on  the  t'-ade  between  Canada  and  Great 
Britain?  (Herbert  and  Montague,  Canada  and  the  Em- 
pire; also  Smart's  Return  to   Protection,   Ch.  XXIII.) . 

11.  What  are  the  penalties  in  the  United  States  for 
under- valuations ?  Does  the  law  seem  to  be  severe  enough? 
(Tariff  Adm.  Act. ;  Cus.  Reg.  of  U.  S. ;  Goss'  Tariff  Admin, 
of  U.  S.). 

12.  How  are  values  determined  in  foreign  customs 
tariffs?  (Kelley's  Tariffs  of  World;  also  special  Con.  Rep. 
of  U.  S.,   1892-1900). 

13.  What  do  consular  invoices  contain?  Suppose  it 
is  impossible  for  an  importer  to  produce  the  sworn  in- 
voice? (Tariff  Admin.  Act  and  U.  S.  Customs  Regula- 
tions). 

14.  Are  the  following  legal  tender  for  the  payment  of 
customs  duties — Trade  dollars,  fractional  currency,  bank 
notes?     (Cus.  Reg.  of  U.  S.). 

15.  Make  a  study  of  the  customs  tariff  law  of  any  one 
country  with  reference  to  the  grouping  of  duties.  (Kelley's 
Customs  Tariffs). 

16.  Give  a  careful  account  of  one  of  the  tariff  wars 
spoken  of  in  the  text  (consult  general  bibliography  of  the 
chapter). 

17.  Why  was  the  countervailing  duty  in  the  United 
States  tariff  act  of  1890  changed  in  the  law  of  1897?  (For. 
Rel.  of  U.  S.,  1894- 1898). 

18.  Is  there  any  difference  between  discriminating  and 
retaliatory  duties? 

19.  What  are  the  regulations  in  Italy,  France  and 
Switzerland  regarding  retaliatory  duties?  (See  Kelley's 
Tariffs  of  World). 

20.  Suppose  that  a  voyage  is  changed  and  a  ship  enters 
Galveston  instead  of  New  York  while  the  consular  in- 
voice is  sent  to  the  collector  at  the  latter  place,  what  hap- 
pens?    (Customs  Regulations  of  U.  S.). 

114 


CHAPTER   IX. 

CUSTOMS 
ADMINISTRATIVE  INSTITUTIONS 

69.  Ports  of   Entry  and   Ports  of   Delivery. — 

As  an  aid  to  tariff  administration  laws  generally 
provide  that  imported  goods  may  be  entered  or 
delivered  only  at  certain  specified  places.  A  port 
of  entry  is  therefore  any  locality,  generally  on  the 
coast  or  frontier,  where  imported  goods  may  be 
entered,  while  a  port  of  delivery  is  either  a  border 
or  inland  point  which  a  government  designates  as 
the  place  where  goods  may  be  delivered  to  the  im- 
porter upon  the  payment  of  customs  duties  and 
other  charges.  All  ports  of  entry  are  generally  also 
ports  of  delivery,  but  all  ports  of  delivery  are  not 
ports  of  entry.  According  to  the  customs  laws  of 
the  United  States,  merchandise  on  reaching  the  port 
of  deHvery  may  be  entered  for  immediate  con- 
sumption in  which  case  it  is  appraised,  classified 
and  delivered  to  the  importer  on  payment  of  the 
estimated  duty,  or  it  may  be  entered  in  bond  for 
appraisement  and  storage  in  any  public  or  private 
bonded  warehouse  which  may  be  at  the  port  of  entry 
or  at  one  of  the  numerous  ports  of  delivery  in  dif- 
ferent parts  of  the  United  States. 

70.  Meaning  and  Advantages  of  Bonded  Ware- 
houses.—  A  bonded  warehouse  is  a  warehouse  in 

115 


COMMERCIAL    POLICIES 

which  articles  are  stored  under  bond,  free  of  taxes 
or  duties  except  incidental  storage  dues,  while 
either  waiting  to  be  entered  for  domestic  consump- 
tion upon  the  payment  of  the  regular  internal  reve- 
nue taxes  or  import  duties,  or  to  be  forwarded  to 
foreign  countries  without  the  payment  of  taxes  or 
duties.  The  warehousing  system,  which  has  gen- 
erally been  adopted  by  leading  commercial  nations, 
is  a  credit  system  whereby  the  government  extends 
the  time  for  the  payment  of  duties  or  taxes  upon 
goods,  in  the  meanwhile  retaining  possession  of  the 
goods  as  security.  Such  a  system  has  an  important 
economic  advantage  to  manufacturers  or  importers 
since  immediate  payment  of  duties  or  taxes  would 
often  involve  large  and  unremunerative  investments 
of  capital.  It  is  also  a  plan  which  offers  great  con- 
venience since  the  importer  or  manufacturer  has 
access  to  the  goods  and  may  dispose  of  them  at  any 
time  by  paying  the  duties,  excises  and  storage  dues 
if  sold  at  home,  or  simply  the  storage  dues  if  sold 
abroad.  There  are  two  general  classes  of  bonded 
warehouses,  those  for  imported  goods  and  those 
for  domestic  products.  The  articles  most  promi- 
nently identified  with  the  latter  class  in  the  United 
States  are  those  of  distilled  spirits  and  of  tobacco. 
The  bonding  of  commodities  under  the  internal 
revenue  system  is,  however,  only  indirectly  related 
to  foreign  commerce. 

71,  United  States  Bonded  Warehouses  for  Im- 
ported Goods. — -  The  warehousing  system  was 
adopted  in  the  United  States  in  1846,  but  has  been 
modified  from  time  to  time  by  subsequent  legisla- 

116 


ADMINISTRATIVE       INSTITUTIONS 

tion.  It  did  away  with  the  method  of  allowing 
credits  on  imports,  the  immediate  payment  of  duties 
being  postponed  only  on  those  goods  which  are 
stored  in  bonded  warehouses.  The  Customs  Regu- 
lations of  the  United  States  contain  the  following 
classification  of  bonded  warehouses  : 

Class  I.  Government  bonded  warehouses  which 
are  owned  or  leased  by  the  government  and  exist 
in  those  ports  where  there  are  no  private  bonded 
warehouses  or  where  they  are  inadequate. 

Class  2.  Importers  bonded  warehouses  which 
contain  exclusively  the  goods  of  large  importers. 
These  are  private  bonded  warehouses  and  the  owner 
must  pay  for  the  services  of  the  customs  officials 
in  charge  of  them,  as  in  the  case  of  all  private 
bonded  warehouses. 

Class  3.  Private  bonded  warehouses  used  for 
the  general  storage  of  imported  goods.  Under 
government  supervision  these  do  a  large  part  of 
the  warehousing  business. 

Class  4.  Private  bonded  warehouses  consisting 
of  yards  or  sheds  for  the  storage  of  wood,  coal, 
molasses,  sugar  in  hogsheads  or  in  tierces,  railroad, 
pig  and  bar  iron,  and  other  heavy  articles. 

Class  5.  Private  bonded  warehouses  consisting 
of  bins  or  parts  of  buildings  or  of  elevators  to  be 
used  for  the  storage  of  grain. 

Class  6.  Private  bonded  warehouses  for  the 
manufacture  for  exportation,  of  articles  made  in 
whole  or  in  part  of  imported  materials;  or  of  ma- 
terials subject  to  internal  revenue  taxes;  also  for  the 

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COMMERCIAL    POLICIES 

storage  and  cleaning  of  imported  rice  intended  for 
exportation. 

Class  7.  Private  bonded  warehouses  for  smelt- 
ing and  refining  imported  ores  and  crude  materials 
intended  to  be  exported  in  a  refined  but  unmanu- 
factured state. 

Finally,  in  this  connection  mention  should  be 
made  of  the  bonded  railroad  cars  which  might  be 
called  warehouses  on  wheels.  While  goods  are  in 
transit  such  cars  serve  the  purpose  of  bonded 
warehouses. 

72.  General  Regulations  Regarding  United 
States  Bonded  Warehouses  for  Imported  Goods. 
— The  regulations  regarding  the  reception  and 
custody  of  goods  are  substantially  identical  in  all 
classes  of  bonded  warehouses  in  the  United  States. 
Some  articles  such  as  perishables  and  explosives 
are  not  entitled  to  storage.  The  importer  or  owner 
of  the  stored  goods  may  withdraw  them  from 
bonded  warehouses  upon  the  payment  of  all  charges 
at  any  time  during  the  credit  period  of  three  years 
provided  by  law.  Goods  not  withdrawn  within 
that  time  are  sold  by  the  Government,  the  proceeds 
of  the  sale  being  used  to  defray  the  accruing 
charges,  and  the  balance,  if  any,  being  returned  to 
the  owner  or  importer  of  the  goods.  Should  the 
proceeds  be  insufficient  to  pay  the  charges,  the  bal- 
ance is  collected  upon  the  warehouse  bond,  by  suit 
if  necessary. 

73.  Free  Ports. —  A  free  port  is  a  maritime  com- 
mercial centre  whose  harbor  is  open  to  the  com- 
merce of  the  world  free  from  customs  supervision 

118 


ADMINISTRATIVE       INSTITUTIONS 

or  from  the  payment  of  customs  duties.  In  these 
ports  ships  may  load  or  unload,  manufacturing  may 
be  carried  on  or  goods  may  be  bought  or  sold  with- 
out interference  from  the  fiscal  authorities  except 
in  the  way  of  regulations  to  enforce  payment  for 
the  rendering  of  specific  services  such  as  wharfage, 
storage  and  the  carrying  out  of  police  and  sanitary 
measures.  Free  ports  arose  in  the  beginning  of 
modern  history  when  states  were  small  and  gov- 
ernments decentralized,  in  order  to  facilitate  the 
increasing  transit  trade  which  resulted  from  the 
growth  of  commerce  after  the  Crusades  and  the 
great  maritime  discoveries.  Italy  was  the  first 
country  to  adopt  this  institution,  most  of  her  im- 
porant  commercial  cities  becoming  free  ports  during 
the  sixteenth  and  early  part  of  the  seventeenth  cen- 
turies. All  her  free  ports  were,  however,  abolished 
in  1865,  soon  after  Italian  unity  had  been  estab- 
lished. In  France  Colbert  accepted  the  principle 
of  free  ports  and  applied  it  to  Marseilles  in  1669. 
Other  French  cities  were  made  free  ports  during 
the  eighteenth  century,  but  all  were  abolished  at 
the  time  of  the  Revolution,  and  although  tempo- 
rarily restored  in  18 14  they  did  not  long  survive. 
In  Austria  and  Hungary  Trieste  and  Fiume  were 
declared  free  ports  in  17 19.  The  free  port  of  the 
former  was  temporarily  abolished  during  French 
domination,  but  was  restored  in  1806.  In  1891 
both  cities  became  incorporated  in  the  Austro-Hun- 
garian  tariff  union.  In  Germany  Altona  was  the 
first  free  port  (1664).  The  Hanseatic  cities  of 
Liibeck,  Bremen  and  Hamburg  were  politically  in- 

119 


COMMERCIAL    POLICIES 

dependent  for  centuries  and  were  practically  free 
ports.  After  1834  there  was  earnest  agitation  for 
their  incorporation  into  the  German  Zollverein. 
Liibeck  joined  the  tariff  union  of  the  North  German 
Confederation  in  1867,  and  Hamburg  and  Bremen 
were  incorporated  into  the  tariff  union  of  the  Ger- 
man empire  in  1888,  Other  free  ports  have  at 
different  times  been  temporarily  established  in  Bel- 
gium, Roumania  and  Russia.  The  only  English 
free  port  in  Europe  is  Gibraltar.  The  institution 
has,  however,  been  employed  in  several  European 
colonies  or  settlements,  the  most  noteworthy  in- 
stances being  Aden,  Singapore  and  Hong  Kong. 

74.  Free  Districts. —  It  appears  from  the  fore- 
going that  free  ports  have  been  generally  abolished 
in  European  countries  since  they  hinder  the  growth 
of  nationality.  They  have  been  replaced  by  the 
bonded  warehouse  system  and  by  the  free  district. 
The  latter  is  a  space  or  zone  within  which  com- 
mercial operations  may  be  carried  on  without  the 
payment  of  customs  duties  and  without  active  in- 
terference on  the  part  of  customs  authorities.  A 
free  district  is  therefore  a  part  of  a  free  port,  differ- 
ing from  the  latter  principally  by  being  much  more 
restricted  both  as  to  area  and  as  to  scope.  It  must, 
however,  be  sufficiently  large  to  fulfill  all  local  re- 
quirements affecting  commercial  operations.  In 
most  of  the  European  countries  where  free  ports 
existed,  free  districts  have  taken  their  place.  Such 
institutions  have  been  established  in  the  important 
German  coastal  cities,  in  Copenhagen,  and  a  move- 
ment is  under  way  looking  toward  their  formation 

120 


ADMINISTRATIVE      INSTITUTIONS 

in  France,  Belgium  and  other  countries.  They  are 
generally  supplemented  by  the  bonded  warehousing 
system  which  is  practically  the  only  plan  in  vogue  in 
England  and  in  the  United  States. 

75.  Proposed  American  Free  Districts.—  There 
are  no  free  districts  in  the  United  States,  such  as 
are  found  in  European  countries.  Their  advisa- 
bility, however,  has  been  more  or  less  discussed. 
Mr.  Shaw,  late  Secretary  of  the  Treasury,  is  an 
advocate  of  a  "bonded  zone  for  export,"  an  insti- 
tution somewhat  analogous  to  the  free  district. 
His  scheme,  as  recently  published  in  the  news- 
papers, is  as  follows : 

"Suppose  instead  of  a  bonded  factory,  we  bond 
a  well  defined  section  of  land  containing,  if  you 
please,  several  thousand  acres.  Within  this  bonded 
territory  all  kinds  of  factories  could  be  entered 
without  the  payment  of  duty.  This  port  should,  of 
course,  contain  no  dwellings.  I  would  allow  free 
coal  and  every  other  element  of  manufacture  ex- 
cepting labor  to  be  entered  free.  In  other  words, 
this  free  port  should  be  a  great  consumer  of  Ameri- 
can labor,  the  product  of  which,  under  the  most 
encouraging  conditions,  should  be  for  export  and 
for  export  only.  If  it  was  removed  from  the  port 
for  the  purpose  of  domestic  consumption  it  should 
pay  the  same  duty  as  if  imported  from  abroad.  I 
do  not  see  wherein  the  American  people  could  be 
harmed  by  such  a  policy,  and  it  would  result  in 
furnishing  employment  to  those  who  choose  to  live 
beneath  our  flag,  consume  our  products  and  work 
at  the  American  scale  of  wages.     All  New  England 


COMMERCIAL    POLICIES 

would  be  benefited  by  such  a  port  somewhere  on  the 
north  Atlantic  coast.  A  similar  port  should  be  es- 
tablished in  the  vicinity  of  Norfolk  and  another  on 
the  gulf.  It  will  take  time  to  develop  the  thought, 
but  it  is  in  absolute  harmony  with  the  present  bonded 
warehouse,  bonded  factory  and  drawback  policy, 
and  we  have  the  example  in  the  free  ports  of  Ger- 
many." 

76.  Frontier  TrafHc  in  the  Narrower  Sense. — 
National  boundary  lines  have  often  been  established 
more  with  reference  to  political  considerations  than 
to  the  economic  interests  of  those  living  on  the 
frontier.  Sometimes  such  lines  divided  individual 
properties  so  that  the  same  person  owned  land  in 
two  different  states.  When  customs  administration 
was  ineffective  and  smuggling  was  more  the  rule 
than  the  exception,  the  inconvenience  of  artificial 
boundaries  was  easily  evaded,  but  such  conditions 
became  incompatible  with  the  development  of  na- 
tional industrial  life.  Special  privileges,  however, 
have  been  granted  in  many  instances  to  those  living 
on  the  frontier,  such  concessions  generally  securing 
free  transit  over  the  border  and  exemption  from 
customs  duties  on  certain  articles  within  a  definitely 
prescribed  zone  on  both  sides  of  the  boundary. 
Such  regulations  are  found  in  many  general  tariff 
laws  and  in  commercial  treaties  between  several  of 
the  countries  of  Western  Europe.  These  provisions 
are  spoken  of  as  regulating  "frontier  trafific  in  the 
narrower  sense"  in  contradistinction  to  "frontier 
traffic  in  the  wider  sense,"  or  border  concessions 

122 


ADMINISTRATIVE       INSTITUTIONS 

which  have  been  extended  to  include  an  entire 
country. 

77.  'Mexican  Free  Zone. —  The  Mexican  Free 
Zone,  which  was  recently  abolished,  was  a  strip  of 
land  about  twelve  and  one-half  miles  wide  extend- 
ing along  the  entire  northern  boundary  of  Mexico. 
It  was  not  strictly  a  free  zone  since  goods  entering 
it  paid  eleven  and  one-half  per  cent,  of  the  regular 
tariff,  the  balance  being  paid  if  they  were  conveyed 
to  any  other  part  of  Mexico.  It  was  originally 
established  along  a  part  of  the  northern  boundary 
in  1858  and  extended  in  1885  across  the  entire 
frontier  of  the  North  in  order  to  discourage  the 
emigration  of  Mexicans  to  the  United  States. 
Formerly  there  were  much  higher  federal  and  state 
taxes  in  Mexico  than  in  the  United  States,  the  result 
being  that  the  cost  of  living  in  the  Mexican  towns 
along  the  border  was  more  than  in  the  neighboring 
Texan  towns.  At  first  all  foreign  goods  entering 
the  Zone  were  exempted  from  all  duties,  excepting 
State  and  Municipal  taxes,  but  when  the  United 
States  raised  its  customs  duties  the  rate  payable  on 
entering  the  Free  Zone  was  gradually  raised  to 
eleven  and  one-half  per  cent,  of  the  regular  Mexi- 
can tariff  rates. 

Furthermore,  the  fall  in  the  price  of  silver  acted 
as  a  protective  tariff,  even  in  the  Free  Zone,  and  the 
Mexican  Government  in  1891  decided  that  goods 
manufactured  in  the  Zone  should  pay  duty  when 
imported  into  the  interior.  This  provision  practi- 
cally put  an  end  to  manufacturing  in  the  Free  Zone 
since  the  advantage  of  low  cost  of  raw  materials  is 

123 


COMMERCIAL    POLICIES 

balanced  by  the  two  high  tariff  walls  by  which  the 
Zone  is  hemmed  in. 

78.  Treaty  Ports, —  Treaty  ports  are  ports  open 
to  commerce  by  virtue  of  international  agreements. 
Such  ports  permitting  trade  between  the  Occident 
and  certain  Oriental  centres  in  China  and  Japan 
have  been  secured  through  numerous  treaties  since 
the  middle  of  the  nineteenth  century.  The  first 
treaty  ports  in  China  were  by  virtue  of  the  Nanking 
treaty  of  1842  between  the  Celestial  Empire  and 
Great  Britain.  These  concessions  were  also  granted 
to  other  nations,  article  III  of  the  treaty  of  1844, 
between  the  United  States  and  China,  stipulating 
that  "the  citizens  of  the  United  States  are  permitted 
to  frequent  the  five  ports  of  Kwang-chow,  Amoy, 
Fuchow,  Ningpo  and  Shanghai,  and  to  reside  with 
their  families  and  trade  there,  and  to  proceed  at 
pleasure  with  their  vessels  and  merchandise  to  and 
from  any  foreign  port  and  either  of  the  said  five 
ports  to  any  other  one  of  them."  At  present 
Chinese  treaty  ports  number  over  thirty.  Japan 
was  also  open  to  foreign  commerce  through  treaty 
ports,  her  commercial  treaty  of  1854  with  the  United 
States  paving  the  way  by  opening  the  ports  of 
Simoda  and  Hakodadi  to  American  commerce. 
Since  1899,  however,  Japan  has  been  recognized  as 
on  an  equality  with  the  other  civilized  powers,  and 
her  entire  country  has  been  thrown  open  to  foreign 
countries. 


124 


ADMINISTRATIVE       INSTITUTIONS 

BIBLIOGRAPHY 

A.  Consult  bibliographies  of  chapters  V  and  VIII. 

B.  *Brit.  Pari.  Rep.  (1904,  344  Continental  Free 
Ports);  *Cons.  Reg.  of  U.  S. ;  "Warehouses  in  Foreign 
Countries,"  Special  Con.  Rep.,  XXXV.,  1905;  **Cus.  Reg. 
of  U.  S. ;  **Indus.  Com.  Rep.  ("warehouse"  in  index  of 
Vol.  XIX.)  ;  **Mon.  Sum.  Com.  and  Fin.  ("Mexican 
Free  Zone,"  Feb.  '05 ;  Warehousing  Industry  in  U.  S.,  Oct. 
'03)  ;  Stat,  at  L.  of  U.  S. 

C.  American  Warehousemen's  Assoc,  (annual  proceed- 
ings) ;  **Dict.  and  Encyc  (especially  "Free  Ports"  in 
Encyc.  Brit.,  vol.  XXVIII),  "Freihafen"  in  Conrad's 
Handw.  der  Staatsvv.,  "Revenue  Laws  in"  Am.  and  Eng. 
Encyc.  Law,  "Warehousing"  in  Palg.  Diet.,  New  Inter. 
Encyc.  and  Univ    Cyc. 

D.  Grunzel,  Pt.,  II.,  Ch.  VII. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  When  importer's  goods  are  deposited  in  a  private 
bonded  warehouse  who  determines  the  storage  charges? 
(Cus.  Reg.  of  U.  S.,  Art.  974)  Who  is  responsible  for 
the  safe-keeping  of  such  goods   (id)  ? 

2.  In  the  selling  of  bonded  goods  by  the  Government 
what  are  the  accruing  charges  (Cus.  Reg.  of  U.  S.,  Art. 
1229) ? 

3.  Suppose  that  while  a  duty-paying  commodity  is  in 
a  bonded  warehouse  a  law  is  passed  abolishing  or  lower- 
ing the  rate  of  duty,  could  the  owner  of  the  bonded  goods 
claim  the  benefit  of  this?  Would  he  be  allowed  to  export 
the  goods  and  then  reimport  them  in  order  to  obtain  the 
benefit  of  the  modified  duties  (Art.  "Warehousing  Sys- 
tem" in  Univ.  Cyc.)  ? 

4.  In  1861  a  severe  attack  was  made  in  Congress  on 
the  warehousing  system  as  being  merely  another  method 
of  giving  credit  on  imports.  How  was  this  answered? 
(Goss'  Tariff  Admin,  of  U.  S.,  p.  57). 

5.  Is  the  collector  of  customs  responsible  for  goods  lost 

I2S 


COMMERCIAL    POLICIES 

while   in    a   bonded    warehouse?      (Brissac    v.    Lawrence, 
2  Blatchf.  U.  S.  121 ). 

6.  If  the  custom-house  officials  unlawfully  allow  the 
goods  to  be  withdrawn  from  a  bonded  warehouse  without 
full  payment  of  duty  is  the  owner  relieved  of  liability  for 
such  duties?  (Minturn  v.  U.  S.,  io6  U.  S.,  437;  also  Am. 
and  Eng.  Encyc.  Law,  XXIV.,  p.  912). 

7.  Did  the  institution  of  free  ports  represent  an  excep- 
tion to  the  mercantile  system? 

8.  What  class  largely  predominated  in  the  maritime 
cities  during  the  Sixteenth  and  Seventeenth  centuries? 
Did  this  class  generally  favor  protection  or  free  trade? 
Why? 

9.  What  are  the  regulations  in  the  German  tariff  of 
Dec.  25,  1902  regarding  frontier  traffic  (Sec.  6,  Art.  i, 
Mon.  Sum  Com.  and  Fin.,  Mr.  '04,  p.  3401)  ? 

10.     Are  foreign  goods  exempted  from  the  payment  of 
import  duties  in  a  treaty  port? 

11.  What  credit  system  in  regard  to  imported  goods 
was  in  vogue  in  the  United  States  prior  to  the  law  of  1846 
establishing  the  bonded  warehouse  system?  (Mon.  Sum. 
Com.  and  Fin.,  Oct.  '03). 

12.  What  are  the  treaty  regulations  between  Austria- 
Hungary  and  Germany  and  between  France  and  Belgium 
regarding  frontier  traffic?     (Grunzel,  Pt,  II.,  Ch.  VII.) 


126 


CHAPTER  X. 

CUSTOMS 

INTERNAL  TAXATION :  EXPORT  AND  IMPORT 

FAVORS 

79.  Internal  Taxes. —  Customs  and  tonnage  du- 
ties are  not,  as  has  been  intimated,  the  only  forms 
of  governmental  receipts.  States  like  England  and 
Prussia  derive  a  large  revenue  from  taxes  on  in- 
comes. The  American  federal  government  has  re- 
sorted to  this  form  of  taxation  at  different  times, 
but  a  federal  income  tax  was  recently  declared  un- 
constitutional by  the  Supreme  Court.  The  de- 
cision, however,  was  very  close  and  it  is  thought  by 
many  that  a  new  law  can  and  will  be  enacted  which 
will  meet  the  constitutional  objection  of  the  Court. 
There  are  also  poll  or  capitation  taxes  as  well  as 
taxes  on  transactions.  The  former  were  common 
in  many  of  the  states  of  the  American  Union,  but 
they  have  gradually  disappeared  in  most  of  them. 
The  latter  have  been  employed  by  the  federal  gov- 
ernment in  times  of  emergency  such  as  during  the 
Civil  and  Spanish-American  wars,  when  a  stamp 
tax  was  levied  on  bills  of  exchange,  transfers  of 
stocks  and  bonds,  bank  checks,  etc.  The  general 
property  tax  is  universal  in  the  United  States,  but 
it  is  at  the  present  time  a  local  or  state  and  not  a 
federal  form  of  taxation.     Finally,  excises  or  taxes 

127 


COMMERCIAL    POLICIES 

levied  on  certain  articles  of  consumption,  such  as 
distilled  and  malt  liquors  and  tobacco,  form  a  very 
important  source  of  income  in  nearly  all  countries. 
In  the  United  States  they  comprise  nearly  one-half 
of  the  receipts  of  the  federal  government.  During 
the  eight  year  periods,  1890-1897  and  1898-1905, 
the  revenue  from  these  sources  averaged  forty-one 
and  forty-seven  per  cent,  respectively  of  the  total 
net  ordinary  receipts,  while  for  the  same  periods 
the  percentages  for  the  customs  revenue  averaged 
forty-two  and  thirty-five  per  cent. 

80.  Internal  Taxes  on  Imported  Merchandise. — 
When  articles  subject  to  internal  taxes  are  im- 
ported, such  taxes  are  levied  on  them  in  addition  to 
the  regular  import  duties.  These  excises,  however, 
are  not  usually  included  in  the  general  tariff  act,  but 
must  be  paid,  as  far  as  possible,  in  the  same  man- 
ner as  similar  taxes  levied  on  domestic  articles. 
In  the  United  States  the  excise  on  tobacco  and  cer- 
tain kinds  of  liquors  is  paid  in  the  form  of  a  stamp 
which  must  also  be  affixed  to  the  imported  article 
before  the  latter  may  enter  the  domestic  market. 
There  are  also  certain  regulations  regarding  the 
packing  of  such  imported  merchandise,  the  general 
rule  being  that  they  must  be  entered  in  those  forms 
in  which  the  domestic  article  is  generally  offered 
for  sale. 

The  levying  of  internal  taxes  on  foreign  imported 
merchandise  is,  to  a  considerable  extent,  regulated 
by  international  agreement.  In  this  matter  one  of 
two  methods  generally  prevails.  Either  nations  mu- 
tually agree  that  they  will  exact  of  each  other  no 

128 


INTERNAL    TAXATION 

Other  or  higher  taxes,  charges  or  requisitions  than 
are  levied  on  the  property  of  their  own  citizens  or 
subjects,  or  they  stipulate  that  they  will  exact  of 
each  other  no  higher  duties  than  are  levied  on  the 
property  of  citizens  or  subjects  of  any  third  nation. 
The  former  plan  usually  characterizes  the  com- 
mercial relations  of  modern  industrial  nations,  while 
the  latter  is  more  often  found  in  commercial  regu- 
lations between  advanced  and  backward  countries. 
Sometimes  states  agree  to  limit  the  number  of  arti- 
cles that  may  be  subjected  to  an  excise  tax  so  far 
as  commercial  relations  with  certain  other  countries 
are  concerned.  Austria-Hungary,  for  example, 
exacts  such  a  limitation  in  her  treaties  with  the 
Balkan  States.  While  states  are  supposed  to  have 
a  free  hand  in  regard  to  taxing  articles  whose  manu- 
facture or  sale  they  monopolize,  there  are  certain 
limitations  as  to  the  number  of  such  articles  in  the 
commercial  treaties  between  Austria-Hungary  and 
the  Balkan  countries. 

8i.  Internal  Taxes  on  Domestic  Products  Des- 
tined for  Exportation. —  An  internal  tax  on  a  do- 
mestic article  which  is  exported  operates  in  the 
same  way  as  an  export  duty.  It  makes  the  article 
more  expensive  and  therefore  more  difficult  to  sell 
in  the  competitive  markets  of  the  world.  When 
sold  abroad  the  tax  on  such  a  commodity  is  usually 
paid  by  the  domestic  producer  or  the  exporter  ex- 
cepting when  the  exporting  country  possesses  a 
world  monopoly. 

As  the  general  policy  of  modern  states  is  not  to 
hinder  but  to  facilitate  foreign  sales,  domestic  prod- 
9  129 


COMMERCIAL    POLICIES 

ucts  destined  for  exportation  are  usually  exempted 
from  the  payment  of  internal  revenue  taxes.  Such 
exemptions  involve  many  administrative  difficulties 
and  are  only  feasible  when  goods  are  produced  in 
large  quantities  and  where  the  industrial  organiza- 
tion is  fairly  well  centralized,  as  in  the  manufacture 
of  tobacco,  malt  and  distilled  liquors,  sugar,  etc. 
As  regards  the  United  States  the  customs  regula- 
tions prescribe  that  distilled  spirits  and  tobacco  in- 
tended for  immediate  exportation  may  be  withdrawn 
from  bonded  warehouses  or  manufactories  without 
paying  internal  revenue  duties  "under  such  regula- 
tions, and  after  making  such  entries  and  executing 
and  filing  with  the  collector  of  the  district  from 
which  the  removal  is  to  be  made,  such  bonds  and 
bills  of  lading  and  giving  such  other  additional 
security  as  may  be  prescribed  by  the  Commissioner 
of  Internal  Revenue,  with  the  approval  of  the  Secre- 
tary of  the  Treasury." 

82.  Drawbacks. —  A  drawback  is  a  repayment, 
in  whole  or  in  part,  of  the  customs  duties  paid  on 
imported  merchandise  when  the  same  is  re-exported. 
The  repayment  may  be  upon  articles  re-exported  in 
the  same  condition  as  imported.  Such  drawbacks 
were  formerly  common,  but  now  they  are  less  im- 
portant owing  to  the  development  of  the  bonded 
warehouse  system,  better  means  of  transportation 
and  communication  and  more  efficient  tariff  regula- 
tions especially  as  regards  the  transit  trade.  Draw- 
backs may  also  be  applied  to  imported  raw  materials 
or  half -manufactured  products  when  the  same  are 
re-exported  in  a  more  advanced  state.     This  form 

130 


INTERNAL     TAXATION 

of  a  drawback  is  becoming  more  and  more  im- 
portant in  modern  commercial  politics. 

The  drawback,  like  the  remission  of  the  internal 
tax  on  goods  destined  for  exportation,  facilitates 
exportation.  It  places  the  domestic  manufacturer 
on  the  same  basis  as  the  foreigner  as  regards  the 
cost  of  his  raw  materials.  In  order  to  apply  the 
drawback  the  identity  of  the  merchandise  must  be 
maintained  and  the  period  between  importation  and 
re-exportation  must  be  limited.  The  difficulties 
involved  in  this  procedure  have  led  to  the  supplant- 
ing of  the  identity  principle  by  the  "equivalent  prin- 
ciple" for  certain  commodities  such  as  wheat  in 
Germany.  By  this  method  the  importer  upon  pay- 
ing the  customs  duties  receives  a  receipt  which  may 
be  transferred,  the  holder  being  entitled  within  a 
certain  period  to  obtain  a  repayment  of  the  customs 
duty  upon  the  exportation  of  the  quantity  of  mer- 
chandise represented  by  the  receipt.  This  system 
is  more  or  less  common  in  Europe,  but  is  open  to 
certain  abuses. 

83.  Drawback  System  in  the  United  States. — 
The  laws  of  the  United  States  prescribe  four  gen- 
eral cases  of  drawbacks. 

A.  Merchandise  upon  which  duties  have  been 
paid  may  remain  in  bonded  warehouses  at  the  ex- 
pense and  risk  of  the  owners,  and  if  exported  di- 
rectly therefrom  within  three  years  shall  be  entitled 
to  drawback.  (R.  S.  2977;  Customs  Regulations 
1114.) 

B.  "When  imported  materials  on  which  duties 
have  been  paid  are  used  in  the  manufacture  of  arti- 

131 


COMMERCIAL    POLICIES 

cles  manufactured  or  produced  in  the  United  States 
there  shall  be  allowed  on  the  exportation  of  such 
articles  a  drawback  equal  in  amount  to  the  duties 
paid  on  the  materials  used  less  one  per  centum  of 
such  duties.  When  the  articles  exported  are  made 
in  part  from  domestic  materials,  the  imported  ma- 
terials, or  the  parts  of  the  articles  made  from  such 
materials,  shall  so  appear  in  the  completed  articles 
that  the  quantity  or  measure  thereof  may  be  ascer- 
tained.    (Tariff  Law,  Sec.  30;  Cus.  Reg.  11 36.) 

C.  Exporters  of  meats  which  have  been  cured 
in  the  United  States  with  imported  salt,  are  allowed 
a  refund  equal  to  the  duty  paid  on  the  salt  in 
amounts  not  less  than  $100.  (Tariff  Law,  par.  284; 
Cus.  Reg.  1 197.) 

D.  A  drawback  equal  to  the  amount  of  the  duty 
is  allowed  upon  all  coal  imported  into  the  United 
States  and  afterwards  used  for  fuel  on  board 
American  vessels  propelled  by  steam  and  engaged 
in  trade  with  foreign  countries  or  in  trade  between 
the  Atlantic  and  Pacific  ports  of  the  United  States. 
(Tariff  Law,  par.  915;  Cus.  Reg.  1206.) 

84.  Direct  or  Open  Export  Bounties.  A  bounty 
is  a  premium  paid,  generally  by  a  government,  to  an 
exporter  upon  certain  articles  of  exports.  Its  effect, 
like  that  of  the  drawback,  is  to  encourage  exporta- 
tion. Such  premiums  were  common  under  the 
Mercantile  System  when  every  effort  was  made  to 
increase  exports,  especially  of  manufactured  goods, 
in  order  to  create  a  favorable  balance  of  trade. 
They  were  also  employed  when  the  domestic  market 
was  overstocked  in  order  to  prevent  an  inland  price 

132 


INTERNAL     TAXATION 

depression  or  in  order  to  aid  a  young  industry  in  its 
efforts  to  obtain  a  footing  in  foreign  markets.  In 
modern  commercial  politics,  however,  while  pre- 
miums of  this  kind  have  played  an  important  role 
in  the  case  of  a  few  articles,  their  use  is  becoming 
less  general. 

There  are  two  classes  of  export  bounties,  direct 
or  open  and  indirect  or  concealed.  One  of  the  best 
examples  of  the  former  is  to  be  found  in  English 
commercial  politics.  In  1689  the  British  govern- 
ment passed  a  law,  which  was  not  repealed  until 
1814,  granting  an  export  bounty  on  wheat  provid- 
ing the  domestic  selling  price  did  not  exceed  a 
certain  amount.  France  formerly  paid  direct  boun- 
ties on  many  articles,  hut  these  have  been  abolished 
excepting  in  the  case  of  her  deep  sea  fisheries. 
Direct  export  bounties  have  also  been  paid  on  cer- 
tain agricultural  exports  of  the  Australian  colonies. 
The  most  prominent  export  bounties  during  the  last 
century  have  been  those  paid  on  European  beet 
sugar.  Some  of  these  have  been  direct  and  others 
indirect.  Germany  in  1891  enacted  a  law  allowing 
a  direct  bounty  upon  this  commodity.  The  law 
stipulated  that  this  bounty  should  be  lowered  in 
1895  and  entirely  cease  in  1897,  but  owing  to  the 
decline  in  the  price  of  sugar,  the  prevalence  of  pre- 
miums in  other  countries  and  the  influence  of  the 
sugar  producers,  the  direct  bounty  was  doubled  in 
1896.  As  far  as  the  United  States  is  concerned 
the  export  bounty  system  has  never  found  a  place 
in  American  commercial  politics,  although  recom- 

133 


COMMERCIAL    POLICIES 

mended  by  Alexander  Hamilton  in  his  famous  re- 
port on  manufactures, 

85.  Indirect  or  Concealed  Export  Bounties. — 

Indirect  bounties  have  generally  resulted  from  the 
inadequate  administration  of  internal  tax  remission 
on  domestic  products  destined  for  exportation. 
This  is  especially  the  case  regarding  beet  sugar  and, 
to  a  less  extent,  brandy.  These  articles  are  subject 
to  an  inland  tax  in  most  of  the  countries  of  Western 
Europe,  the  tax  generally  being  levied  upon  the 
raw  or  half  manufactured  product.  Upon  the  ex- 
portation of  the  finished  article  the  amount  of  the 
internal  tax  is  remitted,  but  the  impossibility  of 
correctly  estimating  this  causes  governments  to  err 
in  favor  of  the  exporter  by  refunding  more  than  the 
original  excise,  the  excess  being  in  the  nature  of  an 
indirect  or  concealed  bounty. 

This  form  of  a  bounty  is  well  illustrated  by  the 
sugar  tax  in  Germany  where  the  excise  was  levied  on 
the  raw  product  of  beets  and  remitted,  when  ex- 
ported, on  the  finished  product — sugar.  Formerly 
it  was  estimated  that  it  took  twenty  pounds  of  beets 
to  make  one  pound  of  sugar,  so  that  when  a  German 
manufacturer  exported  one  pound  of  sugar  the 
government  refunded  a  sum  equal  to  the  excise 
paid  on  twenty  pounds  of  beets.  It  is  readily  seen 
that  under  such  conditions  when,  because  of  better 
methods  of  manufacture  or  of  agriculture,  one 
pound  of  sugar  could  be  extracted  from  less  than 
twenty  pounds  of  beets,  more  was  paid  in  the  tax 
remission  on  the  finished  product,  when  exported, 
than  was  received  in  the  form  of  the  excise  on  the 

134 


INTERNAL     TAXATION 

raw  material.  Although  the  government  attempted 
to  remedy  this  by  constantly  reducing  the  ratio,  the 
advance  in  the  technique  of  agriculture  and  of 
manufacture  more  than  kept  pace  with  the  ratio  of 
reduction  so  that  there  was  continually  paid  to 
sugar  producers  a  concealed  bounty.  This  con- 
tinued until  1 89 1  when  the  government  replaced 
the  indirect  with  a  direct  bounty.  A  concealed 
bounty  has  also,  in  many  instances,  been  allowed  in 
the  case  of  drawbacks  where  duties  have  been  re- 
ceived on  imported  raw  materials  and  more  than 
refunded  upon  the  re-exportation  of  the  finished 
product. 

It  is  a  general  policy  for  states  owning  railways 
to  offer,  in  many  instances,  especially  low  rates  on 
outgoing  freight,  or  to  exact  on  the  other  hand 
relatively  higher  rates  on  incoming  freight. 
While  the  latter  operates  in  the  same  way  as  an 
import  duty  and  tends  to  discourage  importations, 
the  former  acts  as  an  encouragement  to  exporta- 
tions  and  is  in  the  nature  of  an  mdirect  or  concealed 
bounty. 

While  bounties  are  generally  paid  by  the  govern- 
ment they  may  be  paid  by  private  individuals  or  by 
corporations  Thus  privately  owned  railroads  often 
grant  special  rates  on  freight  destined  for  foreign 
markets.  An  organization  of  Austrian  cotton 
spinners  in  1897  paid  an  export  bounty  on  cotton 
yarn  for  a  certain  period  in  order  to  save  the  home 
market  from  over-production  and  the  consequent 
depression  in  price.  A  somewhat  similar  arrange- 
ment exists  in  Germany  among  steel  makers. 

135 


COMMERCIAL    POLICIES 

86.  International    Sugar    Bounty    Question. — 

The  general  purpose  of  an  export  bounty  is  to 
encourage  exportation.  Its  general  effect  is  to 
enhance  the  domestic  price  and  to  lower  the  price  in 
foreign  markets.  An  export  bounty  presupposes  at 
least  an  equivalent  protective  import  duty,  other- 
wise both  the  purpose  and  the  effect  of  the  bounty 
are  defeated.  When  only  a  few  European  countries 
paid  direct  or  indirect  export  bounties  on  sugar  and 
the  supply  of  the  commodity  was  hardly  equal  to 
the  demand,  sugar  producers  prospered  and  sugar 
consumers  were  not  over-burdened  by  the  tax,  but 
when  all  beet  sugar  producing  countries  of  Europe 
began  rivalling  each  other  in  the  payment  of  all 
kinds  of  bounties  the  effect  was  a  large  over-pro- 
duction with  the  corresponding  price  depression, 
not  only  in  foreign  but  also  in  domestic  mark- 
ets. This  situation  was  especially  intensified  by 
that  form  of  indirect  bounty  whereby  a  propor- 
tionally higher  premium  was  paid  in  many  countries, 
notably  in  France,  for  beets  with  a  high  degree  of 
saccharine  matter  or  for  sugar  produced  at  least 
expense  by  means  of  most  improved  methods. 
These  conditions  involved  not  only  a  great  burden 
to  the  home  government,  but  also  became  a  losing 
business  to  many  domestic  sugar  producers.  While 
foreign  consumers,  especially  in  Great  Britain  and 
her  colonies  and  in  the  United  States,  were  having 
the  benefit  of  cheap  sugar  this  was  offset  by  certain 
disadvantages.  English  sugar  refiners  were  driven 
out  of  business  in  the  home  market  and  the  compe- 
tition of  the  bounty-paid  beet  sugar  with  cane  sugar 

136 


INTERNAL     TAXATION 

was  disastrously  affecting  the  interests  of  the  latter 
in  the  British  West  Indies  and  in  British  India. 
To  offset  this  a  countervailing  duty  was  levied,  as 
was  stated  in  the  previous  chapter,  on  all  sugar 
imported  into  British  India  from  countries  paying 
an  export  bounty.  A  similar  provision  has  already 
been  quoted  from  the  tariff  law  of  the  United  States. 
Because  of  these  countervailing  duties,  coupled  with 
opposition  on  the  part  of  England  and  certain  other 
countries,  the  International  Sugar  Conference  of 
1903  resulted  in  the  virtual  abolition  of  sugar 
bounties  in  most  of  the  European  countries. 

87.  Free  Re-importation  of  Unaltered  Domes- 
tic Articles. —  The  commercial  policy  of  modern 
industrial  nations  generally  provides  for  the  free 
re-importation  of  certain  exported  domestic  goods 
which  are  returned  in  an  unaltered  form.  The 
American  tariff'  law  stated  that  "articles  the  growth, 
produce,  and  manufacture  of  the  United  States, 
when  returned  without  having  been  advanced  in 
value  or  improved  in  condition  by  any  process  of 
manufacture  or  other  means,"  shall  be  admitted 
free  of  duty. 

(a)  Empty  Packages.  The  law  of  the  United 
States  secures  free  importation  of  "casks,  barrels, 
carboys,  bags  and  other  vessels  of  American  manu- 
factures, exported  filled  with  American  products,  or 
exported  empty  and  returned  filled  with  foreign 
products." 

(b)  Articles  for  Exhibition  Purposes.  Domestic 
products  which  are  exported  for  purposes  of  exhi- 
bition or  sale  in  foreign  markets,  fairs,  expositions, 

137 


-     COMMERCIAL     POLICIES 

warehouses  or  the  Hke  may  generally,  if  unsold,  be 
returned  to  the  country  of  origin  without  paying 
import  duties.  The  purpose  of  such  a  law  is  to 
encourage  exporters  in  their  efforts  to  advertise 
their  goods  in  foreign  markets.  Before  exportation 
such  articles  must  be  properly  registered  and  re- 
importation must  take  place  within  a  certain  period. 
An  American  law  under  date  of  May  i8,  1896, 
enacts  "that  whenever  any  article  or  articles  or  live 
stock  shall  be  sent  out  of  the  United  States  for  tem- 
porary use  or  exhibition  at  any  public  exposition, 
fair,  or  conference  held  in  a  foreign  country,  such 
articles  shall  be  entitled  to  be  returned  to  the  United 
States,  under  such  regulations  as  may  be  prescribed 
by  the  Secretary  of  the  Treasury,  without  the  pay- 
ment of  customs  duty,  whether  they  shall  be  of 
domestic  or  of  foreign  production.  Provided,  that 
the  articles  of  foreign  production  have  once  paid 
duty  in  the  United  States,  and  no  drawback  has 
been  allowed  thereon;  and  if  any  domestic  articles 
are  subject  to  internal  revenue  tax  such  tax  shall 
be  proved  to  have  been  paid  before  exportation  and 
not  refunded."  Similarly  the  American  law  per- 
mits the  free  importation  of  foreign  articles  for 
purposes  of  exhibition. 

(c)  Personal  Effects  of  Returning  Travelers. 
Articles  of  this  kind  are,  under  certain  limitations, 
almost  universally  admitted  free  of  duty.  The 
American  tariff  act  provides  that  "in  case  of  resi- 
dents of  the  United  States  returning  from  abroad, 
all  wearing  apparel  and  other  personal  effects  taken 
by  them  shall  be  admitted   free  of  duty,  without 

138 


INTERNAL    TAXATION 

regard  to  their  value,  upon  their  identity  being 
estabhshed,  under  appropriate  rules  and  regulations 
to  be  prescribed  by  the  Secretary  of  the  Treasury, 
but  no  more  than  one  hundred  dollars  in  value  of 
articles  purchased  abroad  by  such  residents  of  the 
United  States  shall  be  admitted  free  of  duty  upon 
their  return."     (Sec.  697.) 

88.  Free  Importation  of  Foreign  Articles  to  be 
Re-exported  After  Alteration  or  Repair:  General. 
— Modern  tariff  laws  generally  provide  for  the  free 
importation  of  foreign  articles  which  are  to  be  re- 
exported after  being  repaired  or  further  advanced 
by  manufacturing  processes.  Less  often  a  state 
permits  the  free  re-importation  of  dutiable  domestic 
articles  which  have  been  sent  abroad  for  alteration 
or  repair.  Such  provisions  are  usually  based  upon 
statutory  law,  but  sometimes  they  are  matters  of 
international  agreement.  It  is  necessary  in  admin- 
istering these  laws  to  establish  the  identity  of  the 
imported  material.  In  the  case  of  fabrics  imported 
for  the  purpose  of  bleaching,  coloring,  printing  or 
the  like  it  is  possible  to  maintain  the  identity  by 
means  of  official  marks  or  stamps.  Some  commodi- 
ties, such  as  iron  imported  to  be  made  into  machines, 
or  grain  to  be  milled,  lose  their  identity  in  the 
process  so  that  special  methods  must  be  employed 
such  as  manufacturing  in  bonded  establishments  or 
requiring  the  re-exportation  of  an  estimated  equiva- 
lent in  the  finished  form.  Another  necessity  in  ad- 
ministration is  the  fixing  of  a  definite  period  within 
which  exportation  must  take  place.  Should  such 
exportation  not  follow  there  must  be  an  effective 

139 


C  O  M  ^I  E  R  C  I  A  L    POLICIES 

method  of  securing  the  duty  on  the  imported  ma- 
terial. 

89.  Free  Importation  of  Foreign  Articles  to  be 
Re-exported  After  Alteration  or  Repair:  United 
States. —  The  American  tariff  law  (section  9)  pre- 
scribes "that  all  articles  manufactured  in  whole  or 
in  part  of  imported  materials,  or  of  materials  sub- 
ject to  internal  revenue  tax,  and  intended  for  expor- 
tation without  being  charged  with  duty,  and  without 
having  an  internal  revenue  stamp  affixed  thereto, 
shall,  under  such  regulations  as  the  Secretary  of 
the  Treasury  may  prescribe,  in  order  to  be  so  manu- 
factured and  exported,  be  made  and  manufactured 
in  bonded  warehouses."  While  this  is  the  general 
law  there  is  considerable  freedom  allowed  in  its 
administration  as  regards  certain  articles  such  as 
grain  imported  from  Canada  and  returned  after 
being  milled  in  the  United  States,  railroad  iron  and 
machinery  imported  for  repair  and  foreign  material 
"used  in  the  construction  or  repair  of  vessels  built 
in  the  United  States  for  foreign  account  and  owner- 
ship or  for  the  purpose  of  being  employed  in  the 
foreign  trade."  The  law  in  these  cases  generally 
provides  that  such  foreign  material  "may  be  with- 
drawn from  bonded  warehouses  free  of  duty,  under 
such  regulations  as  the  Secretary  of  the  Treasury 
may  prescribe." 

go.  Miscellaneous  "Free  List"  Articles. — ]\Iany 
modern  tariff  laws,  as  has  been  stated,  contain  a 
list  of  articles  admitted  free  of  duty.  Some  of  these 
articles  are  sufficiently  characteristic  to  deserve 
special  mention.     Thus  there  is  free  entry  into  the 

140 


INTERNAL     TAXATION 

United  States  of  any  animal  imported  especially  for 
breeding  purposes.  Likewise  such  articles  as  books, 
maps,  music,  engravings,  photographs,  etchings, 
lithographic  prints,  charts,  regalia  and  gems,  sta- 
tuary, specimens  or  casts  of  sculpture,  works  of  art, 
etc.,  may  be  imported  free  of  duty  "for  the  use  or 
by  order  of  any  society  or  institution  incorporated 
or  established  solely  for  religious,  philosophical, 
educational,  scientific,  or  literary  purposes,  or  for 
the  encouragement  of  the  fine  arts,  or  for  the  use 
or  by  order  of  any  college,  academy,  school  or  semi- 
nary of  learning  in  the  United  States,  or  any  state 
or  public  library  and  not  for  sale."  In  the  same 
category  belong  works  of  art,  the  production  of 
American  artists  residing  temporarily  abroad,  which 
may  be  imported  without  duty  when  presented  to 
any  public  institution.  In  the  "free  list"  are  also 
found  the  household  effects  of  Americans  returning 
from  foreign  countries  when  used  by  them  not  less 
than  one  year ;  foreign  newspapers,  periodicals,  and 
public  documents  issued  by  foreign  governments, 
as  well  as  books,  maps,  music,  engravings,  etchings, 
bound  or  unbound,  and  charts  which  have  been 
printed  more  than  twenty  years  at  the  time  of  im- 
portation ;  professional  books,  implements,  instru- 
ments, and  tools  of  trade,  occupation,  or  employ- 
ment in  the  actual  possession  at  the  time,  of  persons 
emigrating  to  the  United  States.  There  is  also  a 
"free  list"  which  has  formed  an  important  feature 
in  various  treaties  of  reciprocity  between  the  United 
States  and  other  powers.  Finally,  the  "free  list" 
in  the  American  tariff  act  includes   "wearing  ap- 

141 


COMMERCIAL    POLICIES 

parel,  articles  of  personal  adornment,  toilet  articles 
and  similar  personal  effects  of  persons  arriving  in 
the  United  States;  but  this  exception  shall  only 
include  such  articles  as  actually  accompany  and  are 
in  the  use  of,  and  as  are  necessary  and  appropriate 
for  the  wear  and  use  of  such  persons,  for  the  im- 
mediate purposes  of  the  journey  and  present  com- 
fort and  convenience,  and  shall  not  be  held  to  apply 
to  merchandise  or  articles  intended  for  other  per- 
sons or  for  sale." 

BIBLIOGRAPHY 

A.  Consult  bibliographies  of  chapters  IV.  to  IX.  (in- 
clusive). 

B.  Agric.  Dept.  RepOirts  (especially  ^International 
Sugar  Situation,  F.  R.  Rutter;  Bur.  Statis.  Bulletin  No. 
30)  ;  Brit.  Pari.  Rep.  (especially  *Continental  Bounties, 
Direct  and  Indirect,  1899,  No.  209;  also  1898  Commercial 
No.  2)  ;  Con.  Rep.  of  U.  S. ;  Circulars  of  Customs  Div.  of 
U.  S.  Treas.  Dept.,  (especially  "Free  Entry  of  Domes. 
Products,  Exported  and  Returned,"  1903,  No.  35)  ;  **Cus. 
Reg.  of  U.  S.;  *For  Rel.  of  U.  S.  (index  1861-1899) ; 
R.  S.  of  U.  S. ;  **Tarifif  Law  of  U.  S.  and  Admin.  Act. 

C.  Diet,  and  encyc.  (especially  Conrad,  articles 
"Ausfuhrpramien  und  Ausfuhrvergiitungen"  and  "Vere- 
delungsverkehr")  ;  Economics,  Standard  Texts  (especially 
Marshall,  Mill  and  Smith)  ;   Poole's  Index. 

D.  Van  der  Borght's  Handel,  u.  Handelsp. ;  Dewey's 
Fin.  Hist,  of  U.  S. ;  Fawcett's  Free  Trade  and  Prot.,  Ch. 
II. ;  Grunzel's  Handelsp. ;  Lavison's  La  protection  par  les 
primes;  Root's  Tariff  and  Trade. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

I.  Draw  a  diagram  showing  yearly  amounts  received 
in  the  U.  S.  from  internal  revenue  and  from  customs  dur- 
ing the  past  forty  years.    Are  we  becoming  more  or  less 

142 


INTERNAL     TAXATION 

dependent  upon  internal  revenue?  How  does  the  expense 
of  collection  compare  for  these  two  sources  of  revenue 
since  the  Civil  War  (Statis.  Abs.  of  U.  S.). 

2.  What  is  the  difiference  between  a  drawback  and  a 
bounty?    (Art.  "Drawback"  in  Lalor's  Cyc.  and  Palg.  Diet.). 

3.  Does  a  drawback  operate  disadvantageously  to 
home  producers?  How  would  allowances  of  drawback  in 
the  United  States  on  imported  salt,  for  instance,  affect  the 
interests  of  domestic  salt  producers? 

4.  What  opinions  regarding  bounties  were  held  by 
Alexander  Hamilton?  (Report  on  Manufactures),  Adam 
Smith  (Bk.,  IV.,  ch.  5),  Ricardo  (Ch.  XXII.),  J.  S.  Mill 
(Bk.  v.,  Ch.  X.),  Marshall  (Bk.  V.,  Ch.  VII.)  and  Sidg- 
wick  (Method  and  Scope,  p.   18). 

5.  Is  the  free  reimportation  of  unaltered  domestic  arti- 
cles an  exception  to  the  general  policy  of  protection? 
What  classes  favor  such  a  provision?  What  classes  oppose 
it?  What  are  the  difficulties  of  administering  such  a  law? 
(Grunzel's  Handelsp.,  pp.  539-540;  also  Cus.  Reg.  of  U.  S.) 

6.  How  would  you  answer  the  same  questions  re- 
garding the  free  importation  of  foreign  articles  for  altera- 
tion or  repair? 

7.  Section  seven  of  United  States  Tariff  Administra- 
tive Law  states  that  if  the  appraised  value  of  an  imported 
article  subject  to  an  ad  valorem  duty  exceeds  the  declared 
value  "an  additional  duty  of  one  percentum  of  the  total  ap- 
praised value  thereof  for  eiich  one  percentum  that  such 
appraised  value  exceeds  +he  value  declared  in  the  entry" 
shall  be  paid  in  addition  to  the  duties  imposed  by  law.  If 
the  declared  value  be  $10  the  appraised  value  $12  and  the 
rate  of  duty  50  per  cent,  what  will  be  amount  of  the 
duty?  Since  such  additional  duty  is  not  construed  as 
fraudulent  or  penal  unless  the  appraised  value  exceeds  the 
declared  value  by  more  than  50  per  cent,  why  make  this 
additional  charge?  Has  there  been  any  recent  American 
regulations  in  this  respect?  (Willis,  H.  P.,  Reciprocity  with 
Germany,  Pol.  Econ.  June-Jl.  1907.) 

8.  The  aim  of  the   English   export  bounty  on  wheat 

143 


COMMERCIAL    POLICIES 

was  to  raise  domestic  prices  by  encouraging  exports.    Was 
this  its  effect?     (Gibbin's  Indus.  Hist,  of  Eng.,  p.  199). 

9.  The  text  says,  "An  export  bounty  presupposes  at 
least  an  equivalent  protective  import  duty  otherwise  both 
the  purpose  and  the  effect  of  the  bounty  is  defeated." 
Explain.  Suppose  the  general  domestic  and  foreign  price 
at  the  time  of  the  bounty  is  four  cents  per  pound  and  (a) 
the  export  bounty  is  one  cent  with  no  corresponding  pro- 
tective import  duty;  suppose  (b)  there  is  an  equivalent 
protective  import  duty  of  one  cent  per  pound? 

10.  What  are  some  of  the  abuses  in  the  application  of 
the    "equivalent    principle?"     (Conrad    and    Grunzel). 

11.  May  a  returning  American  traveler  bring  in  $100 
worth  of  foreign  articles  regardless  of  the  character  of 
such  articles?  Suppose  such  articles  are  intended  for  sale? 
Suppose  they  come  under  the  class  of  prohibited  imports? 
Suppose  a  person  brings  in  $75  worth  of  dutiable  and  $75 
worth  of  non-dutiable  articles?  (T.  D.  No.  24934  Jan.  7, 
1904;  Treas.  Dept.  Circular  of  Feb.  ist,  1904;  Cus.  Reg. 
of  U.  S.). 


144 


CHAPTER  XI. 

COMMERCIAL   TREATIES 
THEIR  NATURE,  FORM  AND  CONTENTS 

91.  Definitions. —  A  treaty  is  a  compact,  gener- 
ally in  writing,  between  two  or  more  states,  through 
their  authorized  agents.  The  terms  treaty  and  con- 
vention are  used  more  or  less  synonymously.  The 
former,  however,  generally  refers  to  the  more  im- 
portant international  agreements,  especially  to 
those  which  are  the  v<fork  of  an  international  con- 
gress while  compacts  relating  to  subordinate  ques- 
tions are  usually  designated  by  the  latter  term.  In 
other  words  a  convention  might  be  styled  an  infor- 
mal treaty.  A  commercial  treaty  is  an  international 
agreement  relative  to  trade.  Such  a  treaty  may  be 
very  general  in  character,  as  was  the  case  in  most  of 
the  early  commercial  treaties  of  the  United  States 
which  were  usually  designated  as  treaties  of  "amity, 
commerce  and  navigation"  or  simply  of  "commerce 
and  navigation."  Sometimes,  on  the  other  hand,  a 
commercial  treaty  is  more  special  in  character  and 
deals  only  with  one  subject  from  which  it  derives 
its  particular  name.  Thus  we  speak  of  consular 
treaties,  trade  mark  treaties  or  conventions  and  the 
like. 

C2.  Development  of  Commercial  Treaties. — 
Commercial  treaties  are  of  very  ancient  origin.  One 
10  145 


COMMERCIAL    POLICIES 

governing  the  commercial  relations  between  Rome 
and  Carthage  dates  back  to  the  year  509  B.  C. 
However,  they  did  not  play  an  important  role  in 
commercial  politics  until  within  comparatively  recent 
times.  Beginning  with  the  latter  part  of  the  twelfth 
century  numerous  commercial  treaties  governed  the 
commercial  relations  of  the  Italian  city-republics 
with  each  other  and  with  states  bordering  on  the 
Mediterranean.  During  succeeding  centuries,  with 
the  development  of  trade  and  the  growth  of  nation- 
ality, commercial  treaties  became  more  frequent 
among  the  Western  European  countries.  After  the 
fall  of  Constantinople  into  the  hands  of  the  Turks 
in  1453  the  commercial  relations  between  the  East 
and  the  West  were  regulated  by  the  so-called  Turk- 
ish "capitulations"  or  grants  made  by  sultans  to 
Christian  nations  conferring  on  their  subjects  trad- 
ing privileges  in  the  Ottoman  dominions.  These 
concessions  were  usually  one-sided  arrangements  and 
lacked  the  element  of  reciprocity  which  is  charac- 
teristic of  modern  commercial  treaties.  During  the 
seventeenth  century  colonial  and  navigation  policies 
and  the  wars  of  Louis  XIV  provoked  animosities 
and  retaliatory  tariffs.  The  beginning  and  close  of 
the  eighteenth  century,  however,  were  marked  by 
the  enactment  of  commercial  treaties  of  a  distinctly 
modern  type.  In  the  Methuen  treaty  of  1703  be- 
tween England  and  Portugal  the  latter  removed 
the  prohibitions  •  against  the  importation  of  English 
woolens  in  return  for  preferential  treatment  of 
Portuguese  wines  imported  into  England.  In  the 
Eden  treaty  of  1786  between  France  and  England 

146 


COMMERCIAL     TREATIES 

important  modifications  in  the  way  of  lower  duties 
were  made  in  the  existing  tariff  rates  of  both  coun- 
tries. The  United  States  paved  the  way  for  better  in- 
ternational commercial  relations  by  a  series  of  com- 
mercial treaties  with  European  nations  immediately 
succeeding  the  Declaration  of  Independence  and 
somewhat  later  by  a  series  of  similar  commercial 
treaties  with  the  South  American  countries  after 
the  latter  had  declared  their  independence. 

93.  European  Commercial  Treaties  of  the  Free 
Trade  Era.— The  disturbed  political  conditions 
caused  by  the  French  Revolution  and  the  Napoleonic 
wars  hindered  the  enactment  of  commercial  treaties 
during  the  early  part  of  the  nineteenth  century.  The 
favoring  factors  were  the  abolition  of  internal  cus- 
toms barriers,  the  growth  of  nationality  and  the  in- 
dustrial revolution  with  its  attendant  growth  of 
foreign  trade.  The  movement  toward  better  inter- 
national commercial  relations  found  its  best  expres- 
sion in  the  Cobden  treaty  of  i860  between  England 
and  France  wherein  customs  duties  were  recipro- 
cally lowered  and  both  countries  agreed  to  treat  each 
other  as  well  as  either  of  them  did  other  nations. 
Similar  treaties  were  made  about  this  time  between 
most  of  the  countries  of  Western  Europe  and  to- 
gether they  are  usually  spoken  of  as  "the  treaties 
of  the  free  trade  era"  or  as  "the  system  of  Western 
European  commercial  treaties." 

94.  European  Commercial  Treaties  of  the  Pro- 
tection Era. —  The  reaction  against  free  trade 
which  developed  on  the  European  continent  after 
the  middle  of  the  seventies   reflected   itself  in  the 

147 


COMMERCIAL    POLICIES 

treaties  of  this  period.  In  the  beginning  of  the 
nineties  France,  after  raising  her  tarifif  rates  in 
nearly  all  lines,  adopted  the  system,  already  in  vogue 
in  Spain,  of  a  maximum  and  minimum  tarifif  and 
negotiated  new  treaties  on  this  basis.  This  plan 
was  followed  by  Russia  and  also  by  some  of  the  • 
smaller  European  states.  Germany  about  the  same 
time  (1891-1894)  negotiated  a  series  of  conventions 
with  Austria-Hungary,  Switzerland.  Belgium,  Italy 
and  other  states  wherein  a  maximum  import  duty 
on  certain  articles  was  stipulated.  These  arrange- 
ments, which  were  to  remain  in  force  until  the  end 
of  1903,  are  generally  referred  to  as  the  "system  of 
middle  European  commercial  treaties."  In  1902 
Germany  passed  a  new  tarifif  law  which  dififered,  as 
has  been  already  stated,  from  her  former  tarifif  law 
in  being  more  protective  and  in  establishing  a  mini- 
mum, instead  of  a  maximum  duty  for  grain.  New 
treaties  are  being  negotiated  on  the  basis  of  this 
new  tarifif  law.  The  European  commercial  treaties 
during  the  past  quarter  of  a  century  are  usually 
characterized  as  "treaties  of  the  protection  era." 

95.  What  States  May  Negotiate  Commercial 
Treaties? — Generally  only  sovereign  states  may 
make  treaties  but  this  principle  is  not  so  strictly  ad- 
hered to  in  the  case  of  commercial  treaties.  Egypt, 
for  example,  was  granted  the  right  by  the  Sultan  in 
1873  of  negotiating  commercial  treaties  with  foreign 
powers  and  exercised  this  right  in  several  instances. 
The  Balkan  states  also  before  their  independence 
obtained  or  maintained  this  right.  While  colonies 
may  not  negotiate  treaties  by  themselves  there  has 

148 


COMMERCIAL    TREATIES 

been  inserted  since  1886  in  British  commercial  and 
other  treaties  an  article  whereby  any  of  the  English 
self-governing  colonies  or  India  may  become  a 
party  to  the  treaties  of  the  motherland  at  their  own 
option  any  time  within  two  years  after  a  treaty  has 
been  negotiated.  Sometimes  sovereign  states  waive 
their  right  of  making  commercial  treaties.  The  in- 
dependent principality  of  Liechtenstein  surrendered 
this  right  when  it  was  incorporated  into  the  tariff- 
union  of  Austria-Hungary  and  this  was  the  case 
with  the  independent  duchy  of  Luxemburg  when  it 
joined  the   German  ZoUverein. 

96.  Who    May    Negotiate    Commercial    Trea- 
ties?—  The  right  of  negotiating  a  treaty  generally 
rests  conditionally  with  the  king  in  a  monarchy  and 
with  the  president  in  a  republic,  but  this  right  has 
been  largely  restricted  in  recent  times,  especially  as 
regards  the  negotiating  of  commercial  treaties.     In 
the  United  States  the  Constitution  prescribes  (Art. 
II.,  Sec.  2,  §2)  that  the  President  "shall  have  power 
by  and  with  the  advice  and  consent  of  the  Senate, 
to  make  treaties,  provided  two-thirds  of  the  Sena- 
tors   present    concur."     As    the    Constitution    also 
stipulates  (Art.  I.,  Sec.  7,  §   0  *at  "all  bills  for 
raising  revenue  shall  originate  in  the  House  of  Rep- 
resentatives,"  it   is  a  mooted   question   whether   a 
treaty  involving  a  change  of  revenue  laws,  as  is  the 
case  in  many  commercial  treaties,  must  not  have  the 
sanction  of  both  houses  of  Congress.     The  question 
has  never  been  judicially  passed  upon  by  the  Su- 
preme Court. 

149 


COMMERCIAL    POLICIES 

97.  Duration    of    Commercial   Treaties. — The 

general  stipulation  regarding  political  treaties  es- 
pecially treaties  of  peace,  is  that  they  are  perpetual. 
Such  a  stipulation  in  a  commercial  treaty  is,  how- 
ever, very  exceptional.  Usually  the  duration  of  a 
treaty  of  commerce  is  fixed  for  a  certain  number 
of  years  or  to  a  certain  date  and  there  is  often  a 
provision  requiring  a  notification  period  before  a 
treaty  may  be  terminated,  otherwise  the  treaty  con- 
tinues in  force  until  such  a  notification  be  given  by 
one  or  both  of  the  contracting  parties.  Thus  the 
commercial  treaty  of  1828  between  the  United 
States  and  Prussia  states  that  ''the  present  treaty 
shall  continue  in  force  for  twelve  years,  counting 
from  the  day  of  the  exchange  of  the  ratifications; 
and  if  twelve  months  before  the  expiration  of  that 
period,  neither  of  the  high  contracting  parties  shall 
have  announced,  by  an  official  notification  to  the 
other,  its  intention  to  arrest  the  operation  of  said 
treaty,  it  shall  remain  binding  for  one  year  beyond 
that  time,  and  so  on  until  the  expiration  of  the 
twelve  months,  which  will  follow  a  similar  notifica- 
tion, whatever  the  time  at  which  it  may  take  place." 
The  treaty  is  still  in  force  no  formal  notification 
having  been  given  by  either  government.  It  was 
formerly  common  in  treaties  of  commerce  with 
Eastern  nations  to  stipulate  that  they  should  be  re- 
vised from  time  to  time.  In  the  treaty  of  1858  be- 
tween the  United  States  and  Japan,  for  example,  it 
was  provided  that  after  a  certain  period  upon  the 
request  of  either  party  the  treaty  "shall  be  subject 
to    revision   by    commissioners   appointed   on  both 

ISO 


COMMERCIAL    TREATIES 

sides  for  this  purpose,  who  shall  be  empowered  to 
decide  on,  and  insert  therein,  such  amendments  as 
experience  shall  prove  to  be  desirable." 

98.  Protocol.— Nations  before  entering  into 
treaty  negotiations  sometimes  exchange  views  and 
incorporate  into  a  rough  draft  the  points  to  be  dis- 
cussed. This  rough  draft  or  preliminary  document, 
on  the  basis  of  which  negotiations  are  carried  on, 
is  known  as  a  protocol.  Such  a  protocol  served  as 
a  basis  for  peace  negotiations  at  the  close  of  the 
Spanish-American  war  and  also  at  the  close  of  the 
recent  war  between  Japan  and  Russia.  Sometimes 
the  protocol  is  accepted  and  becomes  virtually  a 
treaty,  as  was  the  case  in  the  regulations  of  1874 
between  the  United  States  and  Turkey  respecting 
the  rights  of  foreigners  to  hold  real  estate  in  the 
Ottoman  Empire.  A  protocol  does  not  always  pre- 
cede negotiations  but  may  form  an  appendix  to  a 
treaty  and  serve  as  a  means  of  interpreting  the  same. 
The  protocol  annexed  to  the  naturalization  treaty 
between  the  United  States  and  Wurtemberg  in  1868 
is  of  this  nature. 

Early  treaties  were  generally  written  in  French 
but  this  is  now  less  common  excepting  in  treaties 
between  Western  nations  and  Oriental  or  semi- 
civilized  countries.  Atnong  advanced  nations  there 
are  generally  two  copies  of  a  treaty,  one  in  each  of 
the  languages  of  the  contracting  parties. 

99.  Subject  Matter  of  Commercial  Treaties. — 
The  subject  matter  of  a  commercial  treaty  depends 
in  a  large  measure,  upon  the  scope  and  importance 
of  the  commercial  relations  of  the  contracting  par- 

151 


COMMERCIAL    POLICIES 

ties  as  well  as  upon  the  degree  of  their  political 
friendship.  Early  treaties  governing  the  commer- 
cial relations  between  nations  were  apt  to  be  of  a 
general  character,  covering  the  whole  field  of  com- 
merce and  navigation.  As  previously  stated,  this 
was  the  character  of  the  first  American  treaties  of 
"amity  and  commerce,"  of  "commerce  and  naviga- 
gation"  or  of  "friendship,  commerce  and  naviga- 
tion." Later  as  particular  commercial  interests 
are  developed  which  are  inadequately  regulated  in 
the  general  commercial  treaties,  nations  negotiate 
treaties  dealing  with  such  special  commercial  mat- 
ters. This  is  exemplified  in  American  history  in 
the  negotiation  of  treaties  relating  to  consuls,  trade 
marks  and  the  like. 

100.  Groups  of  Commercial  Treaties. — There 
are  four  general  groups  into  which  commercial 
treaties  may  be  divided. 

A.  Treaties  containing  both  tariff  stipulations 
and  the  most  favored  nation  agreement  that  each  of 
the  contracting  parties  will  treat  each  other  as  well 
as  they  treat  any  other  third  nation.  Such  treaties 
cover  in  detail  the  most  important  phases  of  the 
commercial  relations  of  the  contracting  parties. 
They  secure  most  favored  nation  treatment  in  gen- 
eral commercial  matters.  As  regards  customs 
duties  the  stipulation  is  either  for  lower  rates  than 
those  contained  in  the  general  tariff  or  that  existing 
rates  will  be  maintained  or  at  least  not  raised  while 
the  treaties  are  in  force.  Such  agreements  are  o-en- 
erally  spoken  of  as  "tariff  treaties"  since  the  tariff" 
concessions  are  looked  upon  as  the  principal  feature 

152 


COMMERCIAL    TREATIES 

of  such  treaties  while  the  most  favored  nation  clause 
is  regarded  as  a  matter  of  course.  They  usually 
represent  close  and  important  commercial  relations 
between  highly  developed  states.  The  Caprivi 
treaties  of  the  early  nineties  between  Germany,  Aus- 
tria-Hungary, Italy,  and  other  countries  belong  in 
this  category. 

B.  Treaties  containing  tariff  stipulations  with- 
out the  most  favored  nation  agreement.  Such 
treaties  are  exemplified  in  the  American  reciprocity 
treaties  of  1854  and  1876  with  Canada  and  Hawaii 
as  well  as  wath  those  contemplated  by  sections  three 
and  four  of  the  American  tariff  act  of  1897  whereby 
the  President,  with  certain  limitations,  was  empow- 
ered to  grant  to  other  countries  tariff  concessions 
in  return  for  equivalent  favors. 

C.  Treaties  containing  the  most  favored  nation 
agreement  without  tariff  stipulations.  Such  treaties 
generally  known  as  "most  favored  nation  treaties" 
comprise  a  large  majority  of  modern  commercial 
treaties.  The  general  American  treaties  of  "com- 
merce and  navigation"  belong  in  this  group  as  well 
as  also  a  large  majority  of  the  commercial  treaties 
between  European  and  over-sea  countries.  Of 
thirty-six  German  commercial  treaties  in  force  in 
January,  1901,  twenty-eight  were  most  favored  na- 
tion treaties. 

D.  Treaties  containing  neither  the  most  favored 
nation  agreement  nor  tariff  stipulations.  Treaties 
of  this  class  usually  contain  only  general  stipula- 
tions regarding  the  conditions  under  which  com- 
merce between  the  contracting  parties  may  be  car- 

153 


COMMERCIAL    POLICIES 

ried  on  and  often  regulate  commercial  dealings 
between  advanced  industrial  nations  and  those  just 
opening  up  their  ports  to  modern  commerce.  The 
treaty  of  "peace,  amity  and  commerce"  of  1854  be- 
tween the  United  States  and  Japan  is  of  this  char- 
acter. 

1 01.  Provisions  of  Commercial  Treaties. — 
Some  of  the  more  important  provisions  of  commer- 
cial treaties  may  be  briefly  enumerated. 

I.  The  preamble  of  the  treaty  names  the  nego- 
tiators and  states  the  purpose  of  the  agreement 
which  is  generally  "the  desire  of  facilitating  and 
developing  the  commercial  relations  established  be- 
tween the  two  countries."  The  introductory  article 
often  states  "that  there  shall  be  between  the  terri- 
tories of  the  high  contracting  parties  a  reciprocal 
liberty  of  commerce  and  navigation."  The  general 
meaning  of  this  clause  as  explained  in  numerous 
treaties  is  that  citizens  or  subjects  of  the  contract- 
ing countries  shall  reciprocally,  on  conforming  to 
the  laws,  be  at  liberty  freely  to  enter,  travel  or  re- 
side in  any  part  of  the  respective  territories,  to  carry 
on  their  business,  acquire  and  dispose  of  real  or 
personal  property,  have  access  to  the  courts  of  jus- 
tice and  enjoy  in  these  respects  the  same  rights  as. 
natives  or  as  are  conceded  to  citizens  or  subjects  of 
the  most  favored  nation.  This  right  of  complete 
reciprocity  or  of  the  most  favored  nation  usually 
applies  also  to  the  vessels  of  either  of  the  contract- 
ing parties. 

While  prohibitions  are  opposed  to  the  principle 
of  "reciprocal  liberty  of  commerce  and  navigation" 

154 


COMMERCIAL    TREATIES 

they  are  allowed  in  certain  cases.  For  example,  the 
importation  and  sale  of  state  monopolized  articles 
like  tobacco  in  certain  countries  as  well  as  some 
articles  of  an  unsanitary  or  immoral  character  are 
often  forbidden  or  restricted.  Likewise  states  are 
often  compelled,  for  purposes  of  protection,  to  make 
special  regulations  in  the  case  of  certain  classes  such 
as  druggists,  peddlers,  commercial  travelers  or 
brokers.  The  privilege  of  the  coasting  trade  is 
generally  reserved  for  native  ship-owners  and  this 
is  often  the  case  as  regards  the  fisheries.  Concern- 
ing prohibitions  the  general  regulation  in  American 
treaties  is  that  "neither  of  the  contracting  parties 
shall  establish  a  prohibition  of  importation,  ex- 
portation or  transit  against  the  other  which  shall  not 
be  applicable  at  the  same  time  to  all  other  nations  ex- 
cept the  special  measures  that  the  two  countries  re- 
serve to  themselves  of  establishing  for  a  sanitary 
purpose  or  in  event  of  a  war."  Not  only  is  one  of 
the  contracting  parties  often  excluded  from  certain 
privileges  enjoyed  by  the  other,  as  is  indicated  above, 
but  also  it  is  often  exempted  from  certain  burdens, 
such  as  forced  loans,  forced  military  service  and 
certain  kinds  of  taxes.  Liberty  of  commerce  and 
navigation  in  the  territories  of  the  contracting  par- 
ties usually  applies  to  the  entire  territory  of  either 
country  but  this  is  restricted  in  certain  eastern  coun- 
ries  like  China,  and  formerly  Japan,  to  certain  "open 
ports." 

2.  Sometimes  a  schedule  of  customs  duties, 
agreed  to  between  the  contracting  parties,  forms  a 
part  of  a  commercial  treaty.     This  was  a  feature 

155 


COMMERCIAL    POLICIES 

of  some  of  the  early  treaties  between  the  United 
States  and  certain  Oriental  countries  like  China  and 
Japan.  In  the  treaty  of  1844  between  the  United 
States  and  the  former  there  is  appended  a  tariff  of 
duties  to  be  levied  on  imported  and  exported  mer- 
chandise at  the  five  treaty  ports.  The  exports  sub- 
ject to  duties  were  arranged  in  fifteen  classes  and 
the  imports  in  seventeen.  The  American-Japanese 
treaty  of  1866  was  similar  in  character.  Schedules 
of  customs  duties  have  formed  an  important  feature 
in  most  of  the  American  reciprocity  treaties  as 
well  as  in  the  commercial  arrangements  based  upon 
conventional  and  maximum  and  minimum  tariffs. 

3.  An  important  feature  in  many  modern  com- 
mercial treaties  relates  to  the  use  of  rivers  and 
canals.  Many  of  the  great  rivers  of  the  world 
have  been  opened  to  international  commerce  through 
international  agreements.  It  was  stipulated  in  the 
treaty  of  peace  of  1783  that  "the  navigation  of  the 
river  Mississippi,  from  its  source  to  the  ocean,  shall 
forever  remain  free  and  open  to  the  subjects  of 
Great  Britain  and  the  citizens  of  the  United  States." 
The  navigation  of  the  St.  Lawrence  river  was  a 
subject  of  discussion  between  Great  Britain  and  the 
United  States  for  many  years  but  it  was  finally  stip- 
ulated in  the  treaty  of  1871  that  this  river  should 
forever  remain  free  and  open  for  purposes  of  com- 
merce to  the  subjects  or  citizens  of  either  country. 
Treaties  between  Great  Britain  and  the  United  States 
grant  reciprocal  rights  regarding  the  navigation  of 
the  St.  John  and  the  Columbia  rivers  as  well  as  the 
use  of  canals  and  other  waterways  on  the  great  lakes. 

156 


COMMERCIAL    TREATIES 

Spain  questioned  the   rights  of  the  United  States 
at  the  mouth  of  the  Mississippi  both  banks  of  which 
were  Spanish  territory,  but  this  was  finally  settled 
by  the  American  acquisition  of  Louisiana  and  the 
Floridas.     The  United  States  obtained  by  treaties 
certain  rights  of  navigation  on  the  La  Plata,  Parana 
and  Uruguay  while  the  Amazon  in  South  America 
and  the  Rhine,  Elbe,  Danube  and  other  large  rivers 
of  Europe  have  been  thrown  open  to  the  commerce 
of  the   world.     In    1857  the  United   States  was  a 
party  to  an  international  agreement  between  Den- 
mark and  the  Powers  by  which  the  former  abolished 
its  system  of  tolls  between  the  Baltic  and   North 
seas  in  consideration  of  a  stipulated  sum  paid  by 
the  latter.     Great  canals,  like  the  Suez  ( 1888) ,  have 
become    "neutralized."      As    regards    the    Panama 
canal  the  Laiited  States  announces  that  it  shall  be 
open  upon  equal  terms  to  the  vessels  of  all  nations. 
4.     An   arbitration   clause  for  the  settlement  of 
special  claims  is  not  infrequently  inserted  in  treaties. 
Such  was  the  case   in  the  Washington  Treaty  of 
1871  wherein  provision  was  made  for  the  settlement 
of  certain  claims  against  Great  Britain  growing  out 
of  the  Rebellion  and  against  the  United  States  re- 
specting   Canadian    fisheries.      Sometimes    treaties 
contain  a  general  arbitration  clause  for  the  settle- 
ment   of    political    or    commercial    disagreements. 
Article    XXI   of   the   treaty  of   1848  between  the 
United  States  and  Mexico  stipulated  that  "if  un- 
happily any  disagreement  shall  hereafter  arise  be- 
tween the  Government  of  the  two  republics,  whether 
with  respect  to  the  interpretation  of  any  stipulation 

157 


COMMERCIAL    POLICIES 

in  this  treaty,  or  with  respect  to  any  other  particu- 
lar concerning  the  poUtical  or  commercial  relations 
of  the  two  nations,  the  said  Governments,  in  the 
name  of  those  nations,  do  promise  to  each  other  that 
they  will  endeavor,  in  the  most  sincere  and  earnest 
manner,  to  settle  the  differences  so  arising,  and  to 
preserve  the  state  of  peace  and  friendship  in  which 
the  two  nations  are  now  placing  themselves,  using 
for  this  end,  mutual  representations  and  pacific  nego- 
tiations. And  if,  by  these  means,  they  shall  not  be 
able  to  come  to  an  agreement,  a  resort  shall  not,  on 
this  account,  be  had  to  reprisals,  aggression,  or  hos- 
tility of  any  kind,  by  the  one  republic  against  the 
other,  until  the  Government  of  that  which  deems  it- 
self aggrieved  shall  have  maturely  considered,  in  the 
spirit  of  peace  and  good  neighborship,  whether  it 
would  not  be  better  that  such  differences  be  settled 
by  the  arbitration  of  commissioners  appointed  on 
each  side,  or  by  that  of  a  friendly  nation.  And 
should  such  course  be  proposed  by  either  party,  it 
shall  be  acceded  to  by  the  other,  unless  deemed  by  it 
altogether  incompatible  with  the  nature  of  the  dif- 
ference or  the  circumstances  of  the  case." 

BIBLIOGRAPHY 

A.  Consult  references  in  chapter  XII. 

B.  Treaties  are  published  officially  by  all  civilized 
governments  and  are  also  found  in  many  private  collec- 
tions. For  foreign  treaties  consult  de  Martens  Recueil 
des  principaux  treaties,  etc.,  1776  to  date;  and  L.  Hertlet's 
Treaties  and  Conventions  between  Great  Britain  and 
Foreign  Powers.  For  American  treaties  consult  the  fol- 
lowing: (i)  **Treaties  and  Conventions  between  the  U.  S. 
and  other  Powers,  1776-1886;   (2)   Compilation  of  Treaties 

158 


COMMERCIAL    TREATIES 

in  force;  (3)  U.  S.  Treaties  from  1776  to  1846  are  con- 
tained in  Vol.  VIII.  of  Stat,  at  L.  of  U.  S.  while  later 
treaties  are  found  in  the  appendix  of  subsequent  volumes. 
Consult  also  Wharton's  Digest  of  Inter.  Law  and  a  **new 
edition  by  J.  B.  Moore. 

C.  Diet,  and  encyc.  (especially  *"Treaties"  in  Am. 
and  Eng.  Encyc.  Law;  "Com.  Treaties"  in  Encyc.  Brit.; 
and  "Handelsvertrage"  in  Conrad's  Handworterb.  and  in 
Holzendorff's  Handbuch  des  Volkerrechts)  ;  **Interna- 
tional  Law  Text-books   (Hall,  Lawrence,  et  al.). 

D.  Van  der  Borght's  Handel  u  Handelsp.,  pp.  444-458; 
Butler's  Treaty-Making  Power;  Cohn's  Handels.,  pp.  497- 
524;  Foster's  Am.  Diplom.  in  Orient  and  *Cent.  of  Am. 
Diplom. ;  Grunzel's  Handelsp.,  pp.  436-463;  Roscher  (tr. 
by  Lalor)  II.,  pp.  414-419;  Schuyler's  Amer.  Diplom,  Ch. 
IX. 

E.  Cullom,  S.  M.,  Treaty-Making  Power,  N.  Am.  R., 
Mr.  '05;  Elliott,  C.  B.,  Treaty-Making  Power  of  U.  S., 
Forum,  XXVII.,  592,  1899;  Jones,  F.  S.,  Treaties  and 
Treaty-Making,  Pol.  Sci.  Q.,  XII.,  420,  1897;  Lodge,  H.  C, 
Treaty-Making  Powers  of  Senate,  Scrib.,  Ja.  1903 ;  Rogers, 
H.  W.,  Treaty-Making  Power,  Am.  Bar  Assoc,  XXL,  243, 
1893. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  May  an  executive  in  a  constitutional  state  modify 
the  revenue  laws  without  the  consent  of  the  legislature? 
How  about  Napoleon  III.  in  regard  to  the  commercial 
treaty  of  i860?     (Meredith's  Protection  in  France,  p.  9). 

2.  If  Congress  pass  a  law  which  a  foreign  power  deem 
a  violation  of  treaty-rights  is  there  any  recourse  to  the 
courts?  (Am.  and  Eng.  Encyc.  Law;  also  Whitney  v. 
Robertson,  124  U.  S.  190;  Richter  v.  Reynolds  (C.  C.  A.) 
59  Fed.  Rep.  577). 

3.  What  was  the  question  at  issue  between  the  Presi- 
dent and  the  Senate  in  1905  regarding  certain  arbitration 
treaties  submitted  by  the  former  to  the  latter? 

4.  What  effect   does  a  tariff  law  have  upon  a  treaty 

159 


COMiMERCIAL    POLICIES 

that  is  inconsistent  with  it?  Whitney  v.  Robertson,  124 
U.  S.  190,  21  Fed.  Rep.  565;  Kelley  v.  Hedden,  124  U.  S. 
196,  31   Fed.  Rep.  607. 

5.  How  are  the  commercial  treaties  of  Tunis  made? 
(Grunzel's  Handelsp.  441). 

6.  Are  any  American  treaties  perpetual?  (Treaties 
and  Conv.  between  U.  S.  and  other  Powers). 

7.  Would  any  state  of  the  American  Union  have  the 
right  to  make  a  commercial  treaty?  Is  it  the  same  in 
Germany?  Do  we  have  commercial  treaties  with  any 
German  state?  If  we  do  how  does  it  affect  our  commer- 
cial relations  with  the  Empire?  (For.  Rel.  of  U.  S.  since 
1890;  also  J.  Pol.  Econ.,  Mr.  '03). 

8.  Is  Cuba  a  sovereign  state?  Is  her  right  to  nego- 
tiate commercial  treaties  in  any  way  abridged?  (See 
"Piatt  Amendment"). 

9.  Did  the  commercial  treaties  of  1854  with  Canada, 
of  1876  with  Hawaii  and  of  1903  with  Cuba  involve  a 
change  in  the  revenue  laws?  If  they  did  how  was  the 
constitutional  requirement  met — that  all  bills  for  raising 
revenue  must  originate  in  the  house?  Should  the  ques- 
tion involved,  be  brought  before  the  Supreme  Court  what, 
in  your  opinion,  would  be  its  decision?  Why?  (Cong. 
Rec.  for  1903  in  connection  with  the  discussion  over  Cuban 
Reciprocity ;  Moore's  Digest  Inter.  Law ;  Butler's  Treaty- 
Making  Power). 

10.  Three  tariff  systems  have  been  mentioned  in  the 
text — the  general,  the  general  and  conventional,  and  the 
maximum  and  minimum.  Consider  commercial  treaties 
negotiated  under  these  different  systems  and  classify  them 
according  to  groups  of  commercial  treaties  enumerated  in 
the  present  chapter. 


160 


CHAPTER  XII. 

COMMERCIAL   TREATIES 
RECIPROCITY  AND  THE  MOST  FAVORED 

NATION  CLAUSE 

102.  Meaning  of  Reciprocity. — The  essence  of 
reciprocity,  whether  applied  to  individual  or  state 
dealings,  is  mutuality  in  the  matter  of  giving  and 
receiving.  As  used  in  connection  with  commerce 
it  denotes  a  treaty  or  convention  between  two  na- 
tions whereby  one  of  the  contracting  parties  grants 
certain  advantages  to  the  other  in  return  for  the 
same  or  equivalent  concessions  received  from  the 
latter.  A  reciprocity  treaty  may  be  of  a  very  gen- 
eral character,  mutual  advantages  being  granted  in 
all  matters  of  trade,  or  it  may  be  restricted  in  its 
scope  to  special  advantages  such  as  those  relating 
to  import  or  export  duties,  tonnage  dues,  consular 
matters  or  the  like.  Reciprocity  was  largely  ab- 
sent from  early  inter-state  treaties.  These  were 
generally  one-sided  arrangements,  often  being  con- 
cessions wrung  from  a  less  fortunate  rival  in  war. 
Even  under  mercantilism,  where  the  dominant 
idea  was  that  a  gain  to  one  nation  involved  a  loss 
to  another,  retaliation  rather  than  reciprocity  was 
the  prominent  feature  in  commercial  politics.  The 
latter  came  into  prominence  in  more  recent  times 
with  the  growth  of  international  law  and  foreign 
II  i6i 


C  O  :,!  -M  E  R  C  I  A  L    POLICIES 

commercial  relations.  In  no  country  may  the  vari- 
ous phases  of  reciprocity  be  studied  to  a  better  ad- 
vantage than  in  the  United  States, 

103.  First  Phase  of  American  Reciprocity. — 
The  first  phase  of  American  reciprocity  was  very 
general  in  character,  the  early  treaties  of  "amity 
and  commerce"  between  the  United  States  and  for- 
eign countries  being  based  upon  the  broad  ground 
of  reciprocity  in  all  matters  of  commerce.  The 
treaty  of  1785  between  Prussia  and  the  United 
States  is  typical  of  this,  the  introductory  words  of 
the  treaty  stating  that  "His  Majesty  the  King  of 
Prussia  and  the  United  States  of  America,  desiring 
to  fix,  in  a  permanent  and  equitable  manner,  the 
rules  to  be  observed  in  the  intercourse  and  com- 
merce they  desire  to  establish  between  their  re- 
spective   countries have    judged    that    the 

same  end  cannot  be  better  obtained  than  by  taking 
the  most  perfect  equality  and  reciprocity  for  the 
basis  of  their  agreement." 

104.  Second  Phase  of  American  Reciprocity. — 
This  phase  of  American  reciprocity  was  more  spe- 
cific in  character  than  the  first  phase  and  related 
primarily  to  tonnage  dues.  As  has  been  previously 
stated  one  of  the  first  acts  of  the  Congress  of  the 
United  States  under  the  Constitution  was  to  levy 
a  discriminating  tax  on  tonnage  whereby  American 
vessels  entering  domestic  ports,  as  well  as  merchan- 
dise imported  in  them  paid  lower  duties  than  were 
required  of  foreign  vessels  and  their  cargoes.  The 
first  modification  of  this  discriminating  law  occurred 
in  1815.     Article  II.  of  the  convention  of  that  year 

162 


COMMERCIAL    TREATIES 

between  the  United  States  and  Great  Britain  en- 
acted that  "no  higher  or  other  duties  or  charges 
shall  be  imposed  in  any  of  the  ports  of  the  United 
States  on  British  vessels  (or  their  cargoes)  than 
those  payable  in  the  same  ports  by  vessels  (including 
their  cargoes)  of  the  United  States,  nor  in  the  ports 
of  any  of  His  Britannic  Majesty's  territories  in 
Europe  on  the  vessels  (or  cargoes)  of  the  United 
States  than  shall  be  payable  in  the  same  ports  on 
British  vessels  (or  their  cargoes)."  It  is  to  be 
noted  especially  that  this  reciprocity  applied  only 
to  the  direct  trade  between  the  United  States  and 
Great  Britain,  while  discriminating  duties  still  gov- 
erned the  trade  relations  of  the  United  States  with 
British  possessions  in  the  West  Indies  and  in  North 
America.  This  principle  of  restricted  reciprocity 
was  extended,  with  some  modifications,  during  the 
next  few  years  to  several  other  countries. 

105.  Third  Phase  of  American  Reciprocity. — 
Reciprocity  in  tonnage  duties  which  characterized 
the  period  between  1815  and  1828  so  far  as  direct 
trade  was  concerned,  was  extended  by  the  lazv  of 
May  24,  1828,  to  include  indirect  trade.  The 
United  States  had  repeatedly  attempted  to  obtain 
from  Great  Britain  a  removal  of  the  discriminations 
which  were  placed  upon  American  vessels  engaged 
in  West  Indian  trade.  Unsuccessful  in  this  by  the 
convention  of  July  3,  181 5,  above  cited,  Congress 
passed  various  laws,  during  the  following  decade, 
of  a  retaliatory  character  the  final  result  being  that 
Great  Britain  agreed  in  1830  to  open  her  West  In- 
dian ports  to  American  vessels  upon  the  payment 

163 


COMMERCIAL    POLICIES 

of  the  same  duties  required  of  English  vessels. 
This  principle  of  reciprocity  in  indirect  as  well  as 
direct  trade  was  extended  by  proclamation  or  by 
conventions  to  other  countries  so  that  it  became  the 
general  policy  governing  the  trade  relations  of  the 
United  States  with  foreign  countries  until  the  out- 
break of  the  Civil  War. 

io6.  Fourth  Phase  of  American  Reciprocity. — 
Early  reciprocity  of  a  special  character  both  in 
Europe  and  in  the  United  States  related  largely  to 
the  subject  of  tonnage  duties  and  came  as  a  reaction 
against  the  navigation  policy  of  various  countries 
especially  of  England  and  of  the  United  States, 
About  1825  in  the  former  country  and  somewhat 
later  in  the  United  States  the  principle  of  reciprocity 
began  to  be  prominent  in  connection  with  the  modi- 
fication of  customs  duties.  Reciprocity  treaties  of 
this  kind  generally  consist  in  each  of  the  contracting 
parties  granting  special  or  lower  import  duties  on 
certain  articles  imported  from  the  other  country 
than  is  required  when  the  same  articles  are  imported 
from  a  third  country.  Such  a  plan  is  apt  to  invite 
retaliation  from  less  favored  countries  and  is  diffi- 
cult to  apply  in  a  country  like  the  United  States 
having  the  general  or  autonomous  tarifif.  As  a  re- 
sult most  of  the  attempts  in  this  country  to  negoti- 
ate reciprocity  treaties  of  this  character  have  re- 
sulted in  failures,  the  exceptions  being  those  of 
1854  with  Canada,  of  1876  with  Hawaii,  and  of 
1903  with  Cuba.  Very  strong  political  reasons 
dictated  the  negotiations  of  the  Hawaiian  and  Cu- 
ban  reciprocity  treaties.     The   Canadian  treaty  of 

164 


COMMERCIAL     TREATIES 

1854  stands  almost  alone  as  the  sole  example  of 
this  phase  of  reciprocity  in  the  United  States  and 
the  fact  that  it  was  terminated  by  this  country  in 
1866  may  be  taken  as  an  indication  that  reciprocity 
of  this  kind  has  not  been  popular  in  the  United 
States. 

107.  Fifth  Phase  of  American  Reciprocity. — 
This  phase  related  to  tonnage  duties.  At  the  time 
of  the  Civil  War  tonnage  duties  were  reenacted.  A 
law  in  1884  prescribed  that  in  lieu  of  the  then  ex- 
isting tonnage  duty  of  six  cents  per  ton  (not  ex- 
ceeding thirty  cents  per  year),  vessels  entering  the 
harbors  of  the  United  States  from  Central  and 
South  American  ports  should  pay  only  three  cents 
per  ton  (not  exceeding  fifteen  cents  per  year)  pro- 
vided American  vessels  were  not  required  to  pay 
any  higher  tonnage  duties  in  such  foreign  ports. 
Vessels  entering  the  United  States  from  all  other 
foreign  countries  were  to  pay  the  old  rate  of  six 
cents  per  ton  (not  exceeding  thirty  cents  per  year). 
Objections  being  raised  against  this  law  by  the  less 
favored  countries  it  was  changed  in  1886,  the  law 
of  that  year  empowering  the  President  to  suspend 
by  proclamation  such  tonnage  dues  "from  any  port 
as  may  be  in  excess  of  the  tonnage  and  light  house 
dues  or  other  equivalent  tax  or  taxes  imposed  in 
said  port  on  American  vessels."  The  policy  of  the 
xA.merican  government  is  therefore  to  abolish  all 
tonnage  duties  provided  other  countries  reciprocate. 
However  as  most  countries  maintain  some  form  of 
light  house  or  other  port  charges  but  few  govern- 

165 


COIMMERCIAL     POLICIES 

merits  have  been  able  to  take  full  advantage  of  this 
law. 

io8.  Sixth  Phase  of  American  Reciprocity. — 
Section  three  of  the  tariff  acts  of  1890  and  1897 
registers  the  sixth  phase  of  American  reciprocity. 
In  the  former  act  all  "sugars,  molasses,  coffee,  tea 
and  hides,  raw  and  uncured"  were  put  upon  the 
free  list  (except  that  refined  sugar  paid  an  import 
duty  of  one-half  cent  per  pound  and  also  a  counter- 
vailing duty  when  imported  from  countries  paying 
an  export  bounty).  All  these  commodities,  except- 
ing sugar,  had  paid  no  import  duty  for  many  years. 
Free  sugar  was  included  in  the  bill  wdien  it  passed 
the  House  in  1890  because  there  was  an  over-flow- 
ing treasury  and  this  together  with  a  bounty  paid 
domestic  producers  furnished  a  good  method  of  re- 
ducing the  revenue.  When  the  law  reached  the 
Senate  there  was  inserted  a  clause,  largely  through 
the  influence  of  the  then  Secretary  of  State,  Mr. 
Blaine,  which  empowered  the  President  to  impose  by 
proclamation  specified  import  duties  on  the  above 
named  commodities  if  he  considered  that  any  coun- 
try exporting  any  or  all  of  them  to  the  United  States 
"imposes  duties  or  other  exactions  on  the  agricul- 
tural or  other  products  of  the  United  States  which, 
in  view  of  the  free  introduction  of  sugar,  molasses, 
tea,  coffee  and  hides  into  the  United  States  he  may 
deem  to  be  reciprocally  unjust  or  unreasonable," 
This  reciprocity  feature  of  the  tariff  act  of  1890 
was  omitted-  in  the  tariff  law  of  1894  but  re-inserted 
in  the  act  of  1897  and  included  in  the  latter,  the 
items  of  coffee,  tea,  tonka  beans  and  vanilla  beans. 

166 


COMMERCIAL     TREATIES 

Sugar  had  been  placed  in  the  duty  list  in  the  law  o£ 
1894  and  retained  there  in  the  act  of  1897  because 
of  the  revenue  needs  of  the  government.     In  ac- 
cordance with  section  three  of  the  tariff  law  of  1890 
reciprocity  treaties  were  negotiated  with  most  of 
the    coffee    and    sugar    producing    countries.     Al- 
though no  concessions  were  obtained  from  the  great 
tea-exporting  countries  of  Asia  or  the   important 
hide-exporting  country  of  Argentine  the  President 
did  not  see  fit  to  place  the  threatened  import  duty 
on  tea  or  hides  coming  from  these  countries.    These 
reciprocity  arrangements  were  annulled  by  the  taritt 
act  of  1894  and  were  not  renewed  in  the  law  of  1897. 
109    Seventh  Phase  of  American  Reciprocity. 
—Section  three  of  the  tariff  act  of  1897,  in  addition 
to  the  feature  referred  to  in  the  preceding  para- 
graph,  authorized    the    President   to   offer    certam 
specified  rates,  which  were  lower  than  the  rates  in 
the  general  tariff,  on  imported  crude  tartar,  bran- 
dies,  champagnes,   wines,   paintings    and   statuary. 
"The  country  aimed  at,"  says   Professor  Taussig, 
"was  France.     The  higher  duties  on  silk  in  the  new 
act  (of  1897)   would  especially  affect  this  country 
and  might  tempt  her  to  reprisals.     Her  system  of 
maximum  and  minimum   duties,  adopted  m   1892, 
was  especially  devised  as  a  means  of  securing  con- 
cessions   in    commercial    negotiations.      Now    the 
United  States  followed  suit  and  arranged  her  own 
system  of  duties  in  such  a  manner  that  concessions 
were    provided    for   in    advance.     The   who  e   had 
somewhat  the  effect  of  a  comedy   each  country    n 
acting  duties  which  it  did  not  really  care  to  enforce 

167 


COMMERCIAL    POLICIES 

and  offering  concessions  which  it  did  not  regard  as 
real  concessions."  A  reciprocal  arrangement,  by 
virtue  of  this  section,  was  made  with  FVance  which 
went  into  effect  on  June  i,  i8g8,  that  country  grant- 
ing her  minimum  rate  on  certain  American  imports 
— the  concessions  being  identical  with  those  granted 
to  the  United  States  under  the  act  of  1890.  Simi- 
lar arrangements  were  also  made  by  the  United 
States  with  Portugal,  Germany,  Italy,  and  Switzer- 
land. 

no.  Eighth  or  Final  Phase  of  American  Reci- 
procity.— The  final  phase  of  American  reciprocity 
is  merely  an  extension  of  the  preceding  phase. 
"With  a  view  to  secure  reciprocal  trade  with  for- 
eign countries"  the  President  was  empowered  by 
section  four  of  the  tariff  act  of  1897  to  make  com- 
mercial arrangements  with  other  nations  offering 
in  return  for  equivalent  concessions,  reductions  on 
import  duties  (the  maximum  being  twenty  per 
cent.),  and  a  transfer  to  or  retention  on  the  free 
list  of  certain  goods.  The  law  required  that  treat- 
ies be  made  within  two  years  after  the  passage  of 
the  act  and  be  arranged  for  a  period  not  exceeding 
five  years.  They  must  furthermore  receive  the 
consent  of  Congress  before  becoming  operative. 
Several  treaties  were  negotiated  by  virtue  of  this  law, 
notably  wnth  France,  Ecuador,  Nicaragua,  and  also 
with  Great  Britain  and  Denmark  for  their  West  In- 
dian colonies  and  sent  to  the  Senate  by  the  end  of 
1899  but  opposition  to  them,  especially  to  the  French 
treaty,  was  strong  enough  to  prevent  ratification. 
Reciprocity  was  finally  settled  so  far  as  the  sugar 

168 


COMMERCIAL    TREATIES 

producing  countries  are  concerned  by  a  stipulation 
in  the  Cuban  reciprocity  treaty  of  1903  granting  a 
reduction  of  twenty  per  cent,  upon  sugar  imported 
into  the  United  States  from  Cuba  with  the  under- 
standing that  "no  sugar  the  product  of  any  other 
country  shall  be  admitted  by  treaty  or  convention 
into  the  United  States  while  this  convention  is  in 
force,  at  a  lower  rate  of  duty  than  that  provided  by 
the  tariff  act  of  the  United  States  approved  July  24, 
1897." 

III.  Meaning  of  the  Most  Favored  Nation 
Clause. —  Reciprocity  treaties  were  at  first  limited 
to  exclusive  and  distinct  engagements  between  the 
contracting  parties,  each  treaty  differing  more  or  less 
from  other  similar  compacts.  As  such  treaties  be- 
came more  frequent  it  often  happened  that  recipro- 
cal arrangements  between  two  nations  were  ren- 
dered, in  a  greater  or  less  degree,  valueless  by  one 
of  the  contracting  parties  granting  more  liberal  con- 
cessions to  some  third  nation.  To  obviate  this  dis- 
advantage it  gradually  became  common  to  stipulate 
in  reciprocity  treaties  that  each  of  the  contracting 
parties  would  grant  to  the  other  every  concession 
granted  to  the  most  favored  nation.  This  stipula- 
tion became  know^n  as  the  most  favored  nation 
clause.  While  traces  of  such  an  arrangement  are 
found  as  early  as  in  the  treaty  of  1654  between  Eng- 
land and  Sweden  the  most  favored  nation  clause 
did  not  form  an  important  feature  in  international 
commercial  agreements  until  the  latter  part  of  the 
eighteenth  century. 


169 


COM  M  ERCIAL    POLICIES 

112.  Restricted  (or  American)  Most  Favored 
Nation  Policy. — The  most  favored  nation  clause 
is  to  be  found  in  the  American  commercial  treaties 
from  the  very  start.  Article  two  of  the  treaty  of 
"amity  and  commerce"  of  1778  between  the  United 
States  and  France — the  first  one  negotiated  by  the 
American  colonies  after  their  "Declaration  of  In- 
dependence," stated  that  "the  Most  Christian  King 
and  the  United  States  engage  mutually  not  to  grant 
any  particular  favor  to  other  nations,  in  respect  of 
commerce  and  navigation,  which  shall  not  immedi- 
ately become  common  to  the  other  party,  who  shall 
enjoy  the  same  favor,  freely,  if  the  concession  was 
freely  made,  or  on  allowing  the  same  compensation, 
if  the  concession  was  conditional."  This  clause 
which  is  substantially  the  same  as  in  most  of  the 
general  American  commercial  treaties  registers  the 
uniform  commercial  policy  of  the  United  States  as 
regards  its  interpretation  of  the  most  favored  nation 
obligation.  It  should  be  carefully  noted  that  this 
stipulation  is  not  opposed  to  reciprocity.  It  does 
not  prevent  the  United  States  from  making  recipro- 
cal arrangements  with  other  nations.  The  most 
favored  nation  clause  means,  according  to  the 
American  interpretation,  that  the  "most  favored 
nation"  is  entitled  to  all  gratuitous  concessions  to 
third  countries  but  if  the  United  States  grants  con- 
cessions to  another  nation  in  return  for  equivalent 
concessions  the  most  favored  nation  may  only  claim 
these  favors  by  granting  the  same  or  equivalent 
favors  in  return.  It  is  the  failure  on  the  part  of 
some  foreign  governments  to  understand  the  con- 

170 


COMMERCIAL    TREATIES 

sistent  and  uniform  policy  of  the  American  govern- 
ment in  this  respect  that  is  responsible  for  the  mis- 
taken claim  that  the  United  States  has  in  some  in- 
stances violated  her  most  favored  nation  obligations. 
113.  Unrestricted  (or  European)  Most  Favored 
Nation  Policy. —  In  the  unrestricted  most  favored 
nation  policy  each  contracting  party  mutually  agrees 
to  grant  unconditionally  to  the  other  every  commer- 
cial  favor  granted   to   a  third   power.     While  the 
policy  of  European  nations  has  not  been  uniform 
regarding  this  subject  the  general  tendency,  since 
the  treaties  of  the  free  trade  era  of  the  sixties,  has 
been  for  most  European  nations  to  regulate  their 
international  commercial  relations  upon  the  basis  of 
unrestricted  most  favored  nation  rights.     This  was 
partially  conceded  in  the  Cobden  treaty  of  i860  be- 
tween England  and  France  wherein  article  nineteen 
stipulated  that  "each  of  the  two  high  contracting 
powers  promises  to  grant  to  the  other  every  favor, 
every  privilege  or  reduction  in  import  duties  of  the 
articles  mentioned  in  the  present  treaty,  which  one 
of  them  should  accord  to  a  third  power."     A  more 
complete  expression   of  unrestricted  most   favored 
nation  rights  is  found  in  article  five  of  the  commer- 
cial treaty  of  1865  between  Belgium  and  the  German 
Zollverein   w^hich    states   that   "every    favor,    every 
immunity,  every  reduction  in  import  or  export  du- 
ties which  one  of  the  high  contracting  parties  shall 
accord  to  a  third  power,  shall  immediately  and  un- 
conditionally extend  to  the  other." 

114.  Scope  of  the  Most  Favored  Nation  Clause. 
— ^The  scope  of  the  most  favored  nation  clause  dif- 

171 


COMMERCIAL    POLICIES 

fers  in  different  countries  and  is  not  always  the 
same  for  different  treaties  in  the  same  country.  In 
the  commercial  treaties  of  the  United  States  the 
most  favored  nation  right  refers  in  some  cases  to 
"any  particular  favor  in  navigation  and  commerce" 
while  in  other  instances  it  applies  to  specific  sub- 
jects such  as  consuls,  diplomatic  agents,  real  estate 
ownership  and  the  like.  In  the  Frankfort  treaty  of 
1871  between  Germany  and  France  it  extends  to 
import,  export  and  transit  duties  as  well  as  to  cus- 
toms formalities.  On  the  one  hand,  in  some 
treaties,  as  for  example  in  the  German-Japanese 
treaty  of  1896,  it  covers  the  whole  field  of  commer- 
cial matters,  while  on  the  other  hand  it  is  sometimes 
restricted  to  a  few  articles  such  as  sugar  and  rice  in 
the  treaty  of  1841  between  England  and  the  German 
Zollverein  or  coal  and  iron  in  the  treaty  of  1846  be- 
tween Belgium  and  Holland.  Occasionally  special 
articles  are  exempted  from  most  favored  nation 
treatment  as,  for  example,  sugar  in  the  provisional 
treaty  of  1881  between  France  and  Austria.  A 
notable  restriction  exists  in  the  most  favored  nation 
regulation  between  Germany  and  France,  article 
eleven  of  the  Frankfort  treaty  stipulating  that  either 
of  the  contracting  parties  must  grant  to  the  other 
gratuitously  and  unconditionally  concessions  given 
to  England,  Belgium,  Holland,  Switzerland,  Aus- 
tria and  Russia. 

Most  favored  nation  treatment  generally  applies 
to  domestic  products  or  vessels  and  not  to  those  of 
colonies.  Differential  treatment  and  most  favored 
nation    agreements    are    not    always    inconsistent. 

172 


COMMERCIAL     TREATIES 

Some  contiguous  countries,  for  example,  grant 
special  favors  regulating  their  border  traffic,  the 
advantages  of  which  most  favored  nations  may  not 
claim.  Close  political  relations  may  sometimes 
justify  preferential  treatment  as  was  the  case  in  the 
American-Hawaiian  treaty  of  1876,  Germany  and 
other  European  countries  vainly  claiming  from 
Hawaii,  by  virtue  of  the  most  favored  nation  agree- 
ment, the  privileges  extended  to  the  United  States. 
While  the  most  favored  nation  right  is  generally  re- 
ciprocal and  enjoyed  by  both  parties  this  is  not  al- 
ways the  case  especially  in  treaties  between  Western 
and  Eastern  nations.  Article  eleven  of  the  treaty  of 
1856  between  the  United  States  and  Siam,  for  in- 
stance, stipulated  that  "the  American  government 
and  its  citizens  will  be  allowed  free  and  equal  par- 
ticipation in  any  privileges  that  may  have  been  or 
may  hereafter  be  granted  by  the  Siamese  govern- 
ment to  the  Government,  citizens  or  subjects  of  any 
other  nation."  There  was  no  reciprocal  obligation 
on  the  part  of  the  United  States  to  extend  the  same 
privileges  to  Siamese  subjects. 

BIBLIOGRAPHY 

A.  Consult  references  in   Chapter  XI. 

B.  Am.  Rep.  Bulletins  of  Bur.  of  (especially  Vol.  I., 
pp.  9-21)  ;  List  of  references  on  Reciprocity,  Cong.  Lib. 
of  U.  S.,  Div.  of  Bibliog. ;  Cong.  Record  (1890  to  date); 
*For.  Rel.  of  U.  S.  1890  to  date  (gen'l  index  1861  to  1899)  ; 
Indus.  Com.  Rep.  (index  in  vol.  XIX);  Mess,  of  Pres. ; 
Mon.  Sum.  Com.  and  Fin.  (S.  and  N.,  '01);  *Poole's  In- 
dex; Supreme  Court  Decisions  (Bartram  et  al.  v.  Robert- 
son, 122  U.  S.  Rep.,  116;  Whitney  v.  Robertson  124  U.  S. 
Rep.  190)  ;  Ways  and  Means  Com.  Report  on  Reciprocity 

173 


COMMERCIAL    POLICIES 

and  Com.  Treaties,  House  Rep.   No.  2263,  54th   Cong,   ist 
Sess.  1896.  ' 

C.  Am.  Econ.  Assoc.  Pub.  Seventeenth  Ann.  Meeting, 
Part  II.;  *Dict  and  encyc.  (especially  Art.  "Reciprocity" 
in  Am.  and  Eng.  Encyc.  Law,  and  Art.  "Meistbegunstigung" 
in  Holzendorfif's  Handbuch  des  Volkerrechts). 

D.  Dietzel's  Retaliatory  Duties ;  Fisk's  Handelsp,  d. 
Ver.  Staaten,  Ch.  III-I V. ;  Grunzel's  Handelsp.,  pp.  463- 
480;  Haynes'  Recip.  Treaty  of  1854  with  Canada,  Am. 
Econ.  Assoc.  Pub.,  VII.,  No.  6,  1892;  Laughlin  and  Willis' 
Reciprocity;  Money's  Elem.  of  Fiscal  Problem,  Ch.  XVII.; 
*Robinson,  C,  Hist,  of  Two  Recip.  Treaties  (with  bib- 
liog.)  ;  Schraut's  System  der  Handelsvertrage;  Wharton's 
Digest  Inter.  Law  (**new  ed.  by  J.  B.  Moore). 

E.  Davis,  S.  M.,  Am.  Reciprocity,  Am.  J.  Pol.,  II.,  113, 
1892;  *Fisk,  G.  M.,  German-Amer.  Most  Favored  Nation 
Relations,  J.  Pol.  Econ.,  Mr.  '03 ;  Foster,  J.  W.,  Com. 
Reciprocity  with  Canada,  Indep.,  LIII.,  2874,  1901  ;  Lauck, 
W.  J.,  Pol.  Significance  of  Recip.,  J.  Pol.  Econ.,  XII.,  495, 
1904;  Longley,  J.  W.,  Reciprocity  between  U.  S.  and 
Canada,  N.  Am.  R.,  Mr.  '02;  Osborne,  J.  B.,  Development 
of  Policy  of  Reciprocity,  Forum,  XXV.,  683,  1898;  Osborne, 
J.  B.,  Expansion  through  Reciprocity,  Atlan.,  LXXXVIIL, 
721,  1901 ;  *Osborne,  J.  B.,  Recip.  in  the  Am.  Tariff  System, 
Ann.  Am.  Acad.  Pol.  Sc,  XXIII.,  55,  '04;  *Osborne,  J.  B., 
Work  of  Recip.  Commission,  Forum,  XXX.,  394,  1900; 
Price,  B..  Reciprocity  in  Commerce,  Contemp.,  XXXV., 
269,  1878;  Willis,  H.  P.,  Reciprocity  with  Cuba,  Ann.  Am. 
Acad.  Pol.  Sc,  XXIL,  127-149,  1903;  *Willis,  H.  P.,  Recip- 
rocity with  Germany,  J.  Pol.  Econ.,  Je-Jl.,  1907. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  Has  the  United  States  made  any  treaties  guaranteeing 
unrestricted  most  favored  nation  rights?  (Art.  VIII. -XII. 
of  Swiss  treaty  of  1850 ;  J.  Pol.  Econ.  March,  1903,  p. 
232,  note;  Treaties  and  Con.,  p.  1359;  Moore's  Inter.  Law 
Digest,  Vol.  v.,  p.  283.) 

2.  The    American    government    granted    complete    ex- 

174 


COMMERCIAL     TREATIES 

emption  of  tonnage  dues  to  German  vessels  in  1888  but 
rescinded  this  action  in  1896.  What  was  the  justification 
for  this  procedure?  (  J.  Pol.  Econ.,  II.,  pp.  229-331;  Mess, 
of  Pres.,  IX.,  697;  For.  Rel.  of  U.  S.  for  1885,  1888,  1894 
and  1896;  Moore's  Digest,  V.,  Sec.  766). 

3.  Germany  claimed  that  the  United  States  should  ex- 
tend to  her  the  same  reductions  made  to  France  in  1898 
on  the  ground  that  the  United  States  enjoyed  all  the  bene- 
fits of  the  German  conventional  tariff.  Was  the  American 
government  justified  in  refusing  this  claim?  (J.  Pol. 
Econ.,  II.,  231).  Switzerland  claimed  the  same  concessions 
and  was  granted  them.  Was  this  right?  (References  in 
question  number  two). 

4.  What  is  the  position  of  the  Republican  party  on 
reciprocity  as  expressed  in  the  national  platforms  since 
1890?  Has  Republican  legislation  been  in  keeping  with 
the  platform  statements  on  reciprocity? 

5.  What  are  the  views  of  the  following  American 
statesmen  regarding  reciprocity?  Blaine  (Twenty  Years 
in  Congress)  ;  Garfield  (works)  ;  Sherman  (works)  ; 
INIcKinley  (Buffalo  Speech  in  1901)  ;  Cummins  of  Iowa 
(Art.  "Reciprocity"  in  Encyc.  Amer.)  ;  and  Roosevelt 
(Mess,  of  Pres.). 

6.  Does  reciprocity  mean  an  abandonment  of  the  policy 
of  protection  or  a  general  lowering  of  import  duties?  Has 
American  reciprocity  since  1890  had  any  effect  on  lower- 
ing import  duties?  in  raising  them?  (Taussig's  Hist,  of 
Tariff,  pp.  281-2;  Am.  Econ.  Assoc.  Pub.  Seventeenth  Ann. 
Meeting,  Part  II.,  pp.  106-129). 

7.  It  was  asserted  by  the  late  Senator  Hanna  that  some 
rates  in  the  tariff  act  of  1897  were  made  abnormally  high 
for  the  purpose  of  obtaining  concessions  from  foreign 
countries  by  lowering  these  rates.  Was  such  a  course 
justifiable?  Was  it  successful?  (References  in  preceding 
question;  also  speeches  of  Allison,  Dolliver,  Hale  and 
Hanna  in  Cong.  Rec.  for  Jan.  1903). 

8.  Has  there  been  any  question  as  to  the  constitution- 
ality of  the  reciprocity  measure  of  1890? 

175 


COMMERCIAL    POLICIES 

9.  Regarding  section  three  of  the  tariflf  act  of  1890 
(sixth  phase)  the  text  states:  "Although  no  concessions 
were  obtained  from  the  great  tea-exporting  countries  of 
Asia  or  the  important  hide-exporting  country  of  Argen- 
tine, the  President  did  not  see  fit  to  place  the  threatened 
import  duty  on  tea  or  hides."  Why?  (Consult  Taussig's 
Hist,  of  Tarifif;  also  Statis.  Abs.  of  U.  S.). 

ID.  According  to  American  treaties  could  the  United 
States  place  an  internal  tax  on  strictly  domestic  articles? 
on  strictly  foreign  articles?  on  articles  both  produced  at 
home  and  also  imported?  Give  examples  and  show  efifects 
in  each  case. 

II.  Make  a  careful  abstract  of  the  commercial  arrange- 
ments of  United  States  with  some  foreign  government  by 
virtue  of  the  reciprocity  clauses  in  tariff  acts  of  1890  or  1897. 
Discuss  the  merits  of  the  case  with  special  reference  to  the 
advantages  obtained  by  United  States.  Discuss  especially 
the  "North"  reciprocity  arrangement  with  Germany  in  1907. 
(Doc.  Catalog;  periodicals  and  trade  papers,  J.  Pol.  Econ. 
Je.-Jl.,  1907). 


176 


CHAPTER    XIII. 
PUBLIC  TRADE-PROMOTING  INSTITUTIONS 

115.  General. —  While  all  governmental  activities 
have  an  influence  in  developing  a  nation's  com- 
merce and  industries,  most  civilized  countries  have 
special  legislative  committees  and  executive  depart- 
ments or  bureaus  devoted  to  the  furthering  of  for- 
eign commerce  and  commercial  relations.  In  the 
legislative  branch  of  the  American  government 
there  are  various  standing  committees  of  the  House 
of  Representatives  and  of  the  Senate  which  are 
charged  with  duties  affecting  the  foreign  commerce 
of  the  United  States.  Among  the  former  may  be 
mentioned  the  committees  on  interstate  and  foreign 
commerce,  foreign  affairs,  and  insular  affairs,  while 
the  standing  committees  of  the  Senate  include  those 
of  commerce,  foreign  relations,  interoceanic  canals, 
Cuban  relations.  Pacific  islands  and  Porto  Rico, 
Philippines,  and  Canadian  relations.  Besides  these 
standing  committees  there  are  also  certain  special 
or  select  committees  such  as  the  Senate  committee 
on  industrial  expositions  and  on  the  transportation 
and  sale  of  meat  products. 

Many  departments  of  the  executive  branches  of 

the   American  government  are  also   charged   with 

duties  relating  to  foreign  trade.     This  is  especially 

the  case  as  regards  the  Department  of  State,  with 

12  177 


COMMERCIAL    POLICIES 

its  Bureau  of  Trade  Relations  and  the  Consular 
Bureau;  the  Treasury  Department  with  its  Board 
of  Appraisers,  Collectors  of  Customs  and  Customs 
Division;  the  Department  of  Commerce  and  Labor 
with  its  Bureau  of  Statistics  and  Bureau  of  Manu- 
factures; the  Department  of  Agriculture  with  its 
Bureau  of  Statistics  containing  a  Division  of  For- 
eign Markets ;  and  the  War  Department  with  its 
Bureau  of  Insular  Affairs. 

Finally,  there  should  be  added  to  this  list  various 
international  and  national  commissions  such  as  the 
International  Bureau  of  American  Republics,  the 
United  States  Industrial  Commission,  the  American 
Reciprocity  Commission,  the  Commission  to  the 
Philippines  and  the  Isthmian  Canal  commissions. 

ii6.  United  States  Department  of  State. — The 
Department  of  State  is  charged,  under  the  direction 
of  the  President,  with  the  duties  appertaining  to 
correspondence  with  the  public  ministers  and  the 
consuls  of  the  United  States,  and  with  the  repre- 
sentatives of  foreign  powers  accredited  to  the  United 
States.  This  department  is  also  the  custodian  of 
the  treaties  made  with  foreign  states,  grants  and 
issues  passports  to  American  citizens  and  exequaturs 
to  foreign  consuls  in  the  United  States,  and  pub- 
lishes, among  other  things,  an  annual  volume  on 
the  Foreign  Relations  of  the  United  States,  all 
American  treaties  and  other  miscellaneous  matter 
of  a  commercial  character.  The  head  of  the  de- 
partment is  the  Secretary  of  State  and  under  him 
are  several  assistants,  the  Third  Assistant  Secretary 
of  State  being  especiallv  charged  with  duties  per- 
'178 


TRADE-PROMOTING    INSTITUTIONS 

taining  to  the  consular  service.  Among  the  bureaus 
of  the  department  having  to  do  with  commercial 
matters  the  most  prominent  are  the  Bureau  of 
Trade  Relations  and  the  Consular  Bureau.  The 
former  prepares  instructions  to  consular  officers  for 
reports  to  be  printed  by  the  Department  of  Com^ 
merce  and  Labor,  revises  and  transmits  such  reports 
to  said  department  and  to  other  branches  of  the 
Government  service,  and  compiles  commercial  in- 
formation for  the  use  of  the  Department  of  State. 
The  work  of  the  Consular  Bureau  has  been  stated 
officially  to  consist  "principally  of  correspondence 
with  consular  officers  in  regard  to  their  official 
duties." 

117.  General  Consular  Service. — A  consul  is  an 
agent  appointed  by  a  government  to  reside  in  some 
foreign  country  for  the  primary  purpose  of  pro- 
tecting and  fostering  the  commercial  interests  of 
the  home  government.  He  differs,  therefore,  from 
a  diplomatic  officer  in  that  the  latter  has  principally 
to  do  with  political  relations.  In  other  words  a 
consul  is  an  official  commercial  agent  while  a  dip- 
lomat is  an  official  political  agent.  While  this  is 
the  general  distinction,  the  duties  of  each  class  often 
overlap,  consular  officers  being  sometimes  required 
to  exercise  political  functions  especially  in  coun- 
tries where  there  are  no  diplomatic  representatives, 
and  the  latter  often  being  charged  with  very  im- 
portant commercial  matters.  While  the  duties  of 
American  consuls  are  manifold  their  most  im- 
portant commercial  functions  consist  in  the  assist- 
ance which  they  render  in  the  administration  of  the 

179 


COMMERCIAL    POLICIES 

tariff  law,  especially  in  the  certification  of  consular 
invoices  and  in  furnishing  reports  on  commercial 
subjects.  As  regards  the  latter,  in  addition  to 
special  reports,  annual  reports  have  been  issued 
since  1856  (Commercial  Relations  of  the  United 
States),  and  later  these  have  been  supplemented  by 
monthly  (since  1881)  and  daily  reports  (since 
1897). 

Officers  with  duties  of  a  diplomatic  or  consular 
character  were  appointed  in  very  ancient  times,  but 
the  modern  consular  system  dates  from  the  rise  or 
revival  of  commerce  in  the  Italian  cities  at  the  time 
of  the  Crusades.  Since  then  the  system  has  be- 
come a  part  of  the  commercial  politics  of  all  civi- 
lized countries.  The  general  duties  and  privileges 
of  consular  officers  are  determined  principally  by 
international  law,  by  treaties,  by  local  customs  and 
by  statutory  enactments  and  therefore  vary  some- 
what to  meet  local  or  national  conditions.  The 
principal  consular  officers  are  usually  appointed  by 
the  executive,  in  the  United  States  by  the  President 
with  the  advice  and  consent  of  the  Senate,  while 
subordinate  consular  officers  are  generally  desig- 
nated by  the  Secretary  of  State  or  by  the  principal 
consular  officers.  In  most  of  the  advanced  nations 
consular  appointments  are  based  upon  competitive 
examination,  tenure  is  during  good  behavior  and 
advancement  is  the  result  of  merit — conditions 
which  offer  honorable  public  careers  to  ambitious 
young  men.  Until  recently  in  the  United  States 
consular  appointments  have  been  secured  through 
political  influence,  applicants  being  subjected  to  an 

180 


TRADE-PROMOTING    INSTITUTIONS 

examination  only  after  their  appointments  were  set- 
tled upon,  while  tenure  has  been  based  upon  political 
elections  and  has  therefore  been  insecure.  Usually 
a  principal  consular  officer  is  accredited  by  the 
home  Secretary  of  State  to  the  corresponding  officer 
in  the  foreign  country,  and  before  entering  upon 
the  duties  of  his  office  he  must  obtain  from  the 
latter  an  exequatur  or  written  permission  to  act  in 
his  official  capacity. 

ii8.  Development  of  the  American  Consular 
Service. —  During  the  War  of  Independence  con- 
sular functions  were  exercised  by  the  American 
commissioners  in  Europe  in  addition  to  their  diplo- 
matic duties.  The  first  consul  of  the  United  States 
was  appointed  in  1780.  After  the  adoption  of  the 
Constitution,  which  conferred  upon  the  President, 
in  conjunction  with  the  Senate,  the  power  of  naming 
consuls,  several  appointments  were  made,  but  the 
first  general  law  regarding  consuls  was  not  passed 
until  1792.  From  that  date  until  1856  various 
consular  laws  were  enacted,  but  in  the  latter  year 
Congress  passed  a  comprehensive  law  which  has 
remained  upon  the  statute  books  with  slight  altera- 
tions until  very  recent  times.  During  the  past  few 
years,  however,  there  has  been  much  agitation  in 
favor  of  certain  reforms  in  the  American  consular 
service.  The  principal  evils  complained  of  have 
been:  "(i)  imperfect  mode  of  selection  of  consular 
officers,  (2)  no  permanency  of  tenure,  (3)  inade- 
quate compensation  resulting  in  (a)  the  exaction 
of  excessive  fees  and  (b)  the  creation  of  consular 
agencies  to  increase  salaries,  (4)  excessive  number 

181 


COM^IERCIAL    POLICIES 

of  consulates  and  commercial  agencies,  (5)  imper- 
fect enforcement  of  regulations,  especially  as  regards 
amounts  of  fees  and  their  collections."  In  order  to 
remedy  the  evils  of  the  American  service  various  bills 
have  been  introduced  in  Congress  from  time  to  time, 
the  main  features  of  which  were  (i)  definite  and 
ample  salaries,  (2)  the  abolition  of  all  unofficial  or 
personal  fees  and  the  payment  of  all  revenue  derived 
from  fees  into  the  United  States  Treasury,  (3)  va- 
cancies filled  by  promotion  and  appointment  based 
upon  merit  and  general  efficiency,  (4)  security  of 
tenure  and  (5)  adequate  inspection  of  the  service. 
The  efforts  towards  reform  resulted  in  the  consular 
law  of  1906  and  this,  supplemented  by  certain  exe- 
cutive orders,  has  placed  the  consular  service  of  the 
United  States  on  a  much  more  satisfactory  basis. 

119.  Present  American  Consular  Law. — The 
consular  service  of  the  United  States  consists  of 
consuls-general,  vice-consuls-general,  deputy  con- 
suls-general, consuls,  vice-consuls,  deputy  consuls, 
and  consular  agents,  besides  various  consular  clerks, 
interpreters  and  marshals.  The  present  law  divides 
the  principal  consular  officers  into  the  following 
classes : 

CONSULS-GENERAL 

Class       I. — Salary $12,000   (  2  in  all) 

II.—      "      8,000   (  6  in  all) 

"       III.—     "      6,000   (  8  in  all) 

"       IV. —     "      5,500   (11  in  all) 

V. —     "      4,500   (18  in  all) 

VI.—      "      3.500   (  9  in  all) 

"     VII.—     "      3,000    (  3  in  all) 

Total 57 

182 


TRADE-PROMOTING    INSTITUTIONS 

CONSULS 

Class      I. — Salary $8,000  (one) 

"        II.—     "      6,000  (  "   ) 

"      III.—     "      S,ooo  (  8  in  all; 

"       IV.—     "      4,500  (12  in  all) 

v.—     "      4,000  (21   in  all) 

"       VI.—     '^      3,500  (32  in  all) 

«     VII.—     "      3,000  (47   in  all) 

"VIII.—     "      2,500  (61   in  all) 

"       IX. —     "      2,000  (70  in  all) 

Total 253 

The  new  law  makes  no  statement  regarding  the 
appointment  of  the  principal  consular  officers  (con- 
suls-general and  consuls),  but  the  general  constitu- 
tional provision  requires  that  they  be  appointed  by 
the  President,  by  and  with  the  advice  and  consent 
of  the  Senate.  The  subordinate  offices  generally 
"shall  be  filled  by  appointment  as  heretofore," 
which  means  that  officials  holding  these  positions 
"are  appointed  by  the  Secretary  of  State,  usually 
upon  the  nomination  of  the  principal  consular 
officer."  The  appointment  of  consular  agents, 
however,  has  been  based  upon  examination  and  their 
tenure  upon  good  behavior.  The  present  law  states 
that  they  "may  be  appointed,  ivhen  necessary,  as 
heretofore."  In  this  connection  mention  should  be 
made  of  recent  acts  of  Congress  providing  for  ten 
"student  interpreters"  to  be  stationed  in  the  Orient. 
They  must  be  non-partisan,  citizens  of  the  United 
States  and  must  agree  to  continue  in  the  service 
ten  years.  Their  main  duty  is  to  study  the  Chinese 
and  Japanese  language  in  order  to  serve  as  inter- 
preters to  legations  and  consulates  in  the  Orient. 

18.? 


COMMERCIAL    POLICIES 

One  of  the  weaknesses  of  the  service  has  been 
the  lack  of  adequate  inspection.  The  present  law 
provides  for  five  inspectors  of  consulates  to  be 
designated  consuls-general  at  large,  who  shall  re- 
ceive an  annual  salary  of  $5,000  and  travelling 
expenses  and  shall  be  appointed  from  the  members 
of  the  consular  force  possessing  the  requisite  quali- 
fications of  experience  and  ability.  They  must 
inspect  such  consulates  as  the  Secretary  of  State 
shall  direct,  but  the  law  specifies  that  each  consular 
office  shall  be  inspected  at  least  once  in  every  two 
years. 

Foreigners  shall  not  be  appointed  to  any  consular 
post  in  the  American  service  the  salary  of  which  is 
in  excess  of  $1,000  per  annum  nor  shall  any  consul- 
general,  consul,  or  consular  agent  receiving  a  salary 
of  $1,000  or  over  engage  in  any  business  within  his 
consular  district. 

Formerly  fees  were  generally  regarded  as  per- 
quisites of  the  office,  and  in  a  great  many  instances 
such  fees  appropriated  by  consuls  were  largely  in 
excess  of  their  regular  salary.  Later  the  law  dis- 
tinguished between  official  and  unofficial  fees,  the 
former  being  paid  into  the  United  States  Treasury. 
This  curtailment  of  personal  fees  without  a  corre- 
sponding increase  of  salary  made  the  remuneration 
so  small  that  many  consular  officers  found  it  next 
to  impossible  to  live  respectably  on  their  salaries, 
a  condition  of  affairs  demoralizing  to  the  service. 
The  present  law  remedied  these  defects  by  making 
more  liberal  salary  allowances  and  stipulating  also 
"that  all  fees,  official  or  unofficial,  received  by  any 

184 


TRADE-PROMOTING    INSTITUTIONS 

officer  in  the  consular  service  for  services  rendered 
in  connection  with  the  duties  of  his  office  or  as  a 
consular  officer  .  .  .  shall  be  accounted  for  and 
paid  into  the  Treasury  of  the  United  States,  and  the 
sole  and  only  compensation  of  such  officers  shall  be 
by  salaries  fixed  by  law." 

120.  Recent  Regulations  Governing  Appoint- 
ments and  Promotions. —  In  the  various  consular 
reform  measures  advocated  in  recent  years  em- 
phasis has  been  laid  upon  the  importance  of  apply- 
ing civil  service  rules  in  the  matter  of  appointments 
and  promotions.  This  has  been  the  principal  rock 
on  which  proposals  for  the  reform  of  the  consular 
service  have  been  wrecked,  opposition  coming 
largely  from  politicians  who  fear  the  loss  of  political 
patronage.  The  present  act  was  passed  by  Con- 
gress only  after  the  elimination  of  provisions  regu- 
lating appointments  and  promotions.  Much,  how- 
ever, has  been  accomplished  to  supply  this  deficiency 
by  means  of  "executive  orders,"  or  such  regulations 
as  the  law  authorizes  the  President  to  prescribe  "for 
the  admission  of  persons  into  the  civil  service  of  the 
United  States  as  may  best  promote  the  efficiency 
thereof."  The  weakness  of  these  regulations  lies 
in  the  fact  that  they  may  be  changed  or  abolished 
at  the  will  of  the  executive.  Public  opinion,  how- 
ever, is  so  aroused  on  this  subject  that  there  is  little 
likelihood  of  any  retrograde  movement. 

A  step  in  the  right  direction  was  President  Cleve- 
land's Executive  Order  of  September  20,  1895, 
whereby  it  was  prescribed  that  vacancies  in  con- 
sulates-general, consulates,  commercial  or  consular 

185 


COMMERCIAL    POLICIES 

agencies,  where  the  salary  was  not  less  than  $i,ooo 
nor  over  $2,500  per  annum  must  be  filled  "(a)  by  a 
transfer  or  promotion  from  some  other  position 
under  the  Department  of  State  of  a  character  tend- 
ing to  qualify  the  incumbent  for  the  position  to  be 
filled,  or  (b)  by  appointment  of  a  person  not  under 
the  Department  of  State  but  having  previously  served 
thereunder  to  its  satisfaction  in  a  capacity  tending  to 
qualify  him  for  the  position  to  be  filled,  or  (c)  by  the 
appointment  of  a  person  who,  having  furnished  satis- 
factory evidence  of  character,  responsibility  and 
capacity,  and  being  thereupon  selected  by  the  Presi- 
dent for  examination,  is  found  upon  such  examina- 
tion to  be  qualified  for  the  position."  These  regula- 
tions were  extended  by  the  present  administration 
in  the  executive  order  of  November  loth,  1905  to 
include  all  consular  vacancies  mentioned  above 
where  salaries  were  not  less  than  $1,000  per  annum. 
121.  Present  Regulations  Governing  Appoint- 
ment and  Promotions. —  By  the  Executive  Order 
of  June  2.^,  1906,  the  President  prescribed  the  fol- 
lowing regulations  to  govern  the  selection  of  con- 
suls-general and  consuls,  subject  to  the  advice  and 
consent  of  the  Senate :  ( i )  vacancies  in  the  offices 
of  consuls-general  and  all  consuls  above  class  VIII 
are  to  be  filled  by  promotion  from  lower  grades; 
(2)  vacancies  in  the  offices  of  classes  VIII  and  IX 
shall  be  filled,  (a)  by  promotion  of  subordinate 
consular  officials,  or  (b)  by  new  appointments  of 
candidates  passing  a  satisfactory  examination;  (3) 
Department  of  State  officials  having  a  salary  of 
$2,000  or  over  are  eligible  for  any  consular  post 

186 


TRADE-PROMOTING    INSTITUTIONS 

above  class  VIII  of  consuls ;  (4)  the  chief  examiner 
of  the  Civil  Service  Commission  or  some  one  desig- 
nated by  it,  the  Chief  of  the  Consular  Bureau  and 
one  other  official  of  the  State  Department  shall  con- 
stitute a  Board  of  Examiners  for  admission  to  the 
consular  service;  (5-6)  this  Board  shall  formulate 
rules  for  and  hold  examinations  of  applicants  as 
well  as  prescribe  the  scope  and  method  of  the  ex- 
aminations, but  certain  designated  subjects  must  be 
included;  (7-8)  the  examination  is  rated  on  a  scale 
of  100,  a  passing  grade  being  80  or  over,  and  can- 
didates must  be  between  the  ages  of  twenty-one  and 
fifty,  citizens  of  the  United  States,  and  of  good 
health  and  character  and  "be  specially  designed  by 
the  President  for  appointment  to  the  consular  serv- 
ice subject  to  examination ;"  (9)  whenever  a  va- 
cancy occurs  in  the  eighth  or  ninth  class  of  consuls 
"which  the  President  may  deem  it  expedient  to  till," 
the  list  of  candidates  who  have  passed  the  required 
examination  shall  be  sent  to  him  for  his  informa- 
tion;  (10)  all  promotions  must  be  based  on  effi- 
ciency ;  (11)  all  vice-consuls,  deputy  consuls,  con- 
sular agents  or  student  interpreters  must  pass 
the  required  examination  in  order  to  become  eligible 
for  promotion;  (12)  in  the  matter  of  appointments 
the  political  affiliations  of  the  candidates  are  not  to 
be  considered,  but  due  regard  must  be  had  to  secur- 
ing proportional  representation  in  all  the  states  and 
territories. 

122.  Regulations  Governing  Examinations. — 
In  pursuance  of  the  Executive  Order  of  June  27, 
1906,  the  Board  of  Examiners  has  adopted  certain 

187 


COAIMERCIAL    POLICIES 

regulations  governing  examinations.  These  ex- 
aminations are  the  same  for  all  grades  and  are  both 
oral  and  written.  The  object  of  the  oral  examina- 
tion is  "to  determine  the  candidate's  business  ability, 
alertness,  general  contemporary  information,  and 
natural  fitness  for  the  service,  including  moral, 
mental  and  physical  qualifications,  character,  ad- 
dress and  general  education  and  good  command  of 
English."  The  written  examination  includes  "those 
subjects  mentioned  in  the  executive  order,  to  wit, 
French,  German  or  Spanish,  or  at  least  one  modern 
language  other  than  English ;  the  natural,  industrial, 
and  commercial  resources  and  the  commerce  of  the 
United  States,  especially  with  reference  to  possi- 
bilities of  increasing  and  extending  the  foreign 
trade  of  the  United  States ;  political  economy,  and 
the  elements  of  international,  commercial,  and 
maritime  law.  It  likewise  includes  American  his- 
tory, government  and  institutions ;  political  and 
commercial  geography;  arithmetic  (as  used  in  com- 
mercial statistics,  tariff  calculations,  exchange,  ac- 
counts, etc.)  ;  the  modern  history  of  Europe,  Latin 
America,  and  the  Far  East  since  1850,  with  particu- 
lar attention  to  political,  commercial,  and  economic 
tendencies.  In  the  written  examination,  compo- 
sition, grammar,  punctuation,  spelling  and  writing 
are  given  attention."  In  order  to  become  eligible 
for  appointment  in  countries  where  the  United  States 
exercises  extraterritorial  jurisdiction,  additional  ex- 
aminations are  required  in  the  principles  of  the  com- 
mon law,  the  rules  of  evidence  and  the  trial  of  civil 
and  criminal  cases.     Student  interpreters  are  sub- 

188 


TRADE-PROMOTING    INSTITUTIONS 

jected  to  the  same  examination  as  other  consular 
apphcants  excepting  that  their  age  Hmits  are  nineteen 
to  twenty-six  inchisive,  and  they  must  be  unmarried 
and  agree  to  continue  in  the  service  ten  years  if  the 
government  desires  them  to  do  so.  Candidates 
attaining  upon  the  whole  examination  an  average 
mark  of  at  least  eighty  are  placed  upon  the  eligible 
list  for  a  period  of  two  years. 

123.  Criticism  of  the  Present  American  Con- 
sular Service. —  In  summarizing  recent  legislation 
and  regulations  afifecting  the  American  consular 
system,  it  may  be  said  that  the  tendencies  are  in  the 
direction  of  more  efficient  service.  The  law  of 
April  5,  1906,  bettered  conditions  by  reclassifying 
consular  offices,  abolishing  unofficial  fees,  providing 
more  equitable  and  adequate  salaries  and  making 
provision  for  more  regular  and  efficient  consular 
inspection.  Executive  orders  have  improved  the 
service  especially  in  the  way  of  regulations  govern- 
ing appointments  and  promotions.  These  have  not, 
however,  been  entirely  adequate  and  their  value  is 
lessened  by  the  fact  that  they  may  be  changed  or 
abolished  as  already  stated,  at  the  will  of  the  execu- 
tive. The  political  character  of  appointments  was 
very  little  changed  by  the  executive  orders  of  Sep- 
tember 20,  1895,  and  November  10,  1905.  Candi- 
dates were  chosen  for  particular  posts  in  the  service 
almost  entirely  from  political  considerations,  and  it 
was  quite  settled  that  their  appointment  would  issue 
after  they  had  passed  the  prescribed  examination. 
Under  such  conditions  an  examination  acted  as  only 
a  slight  deterrent  to  political  appointments  and  very 


COMMERCIAL    POLICIES 

few  failed  who  were  allowed  to  take  the  examina- 
tion. Under  the  new  order  of  June  27,  1907,  the 
situation  is  considerably  improved.  The  candidate 
comes  up  for  examination  not  only  without  any  in- 
formation whatever  as  to  the  post  to  which  he  may 
be  appointed,  but  also  without  the  definite  assurance 
that  he  will  be  appointed  to  any  post,  although  he 
may  receive  the  necessary  marks  which  entitle  him 
to  be  placed  upon  the  eligible  list.  Furthermore, 
an  applicant  is  not  now  eligible,  as  in  the  past,  to 
the  higher  positions — a  condition  acting  as  a  dis- 
couragement for  purely  political  appointees.  In 
commenting  on  the  new  order  a  prominent  govern- 
ment official  states  that  "political  considerations  do 
not  enter  into  the  designation,  as  they  did  under  the 
old  order,  and  furthermore,  other  things  being  equal, 
the  designations  as  well  as  appointments  are  to  be 
made  so  as  to  secure  proportional  representation  of 
all  the  states  and  territories."  As  regards  the 
second  point,  proportional  representation  is  not  a 
new  idea  in  the  United  States  as  it  has  always  been 
more  or  less  of  an  unwritten  law.  As  to  the  first 
point  the  executive  order,  which  has  already  been 
quoted,  stating  that  "no  one  shall  be  examined  .  .  . 
who  has  not  been  specially  designated  by  the  Presi- 
dent for  appointment  to  the  consular  service  subject 
to  examination,"  does  not  necessarily  insure  that 
political  considerations  will  not  enter  into  the  desig- 
nation. Nor  are  there  any  intimations  either  in  the 
executive  order  or  in  the  regulations  governing 
examinations  as  to  the  manner  in  which  these  desig- 
nations are  made.     They  might  be  made  in  such  a 


TRADE-PROMOTING    INSTITUTIONS 

way  as  to  open  the  door  to  all  aspirants  or  so  as  to 
discourage  them  more  or  less  effectively.  The  gen- 
eral rules  and  Order  suggest  that  the  latter  course 
is  regarded  by  the  President  and  the  Department  as 
the  most  effective.  The  popular  idea,  therefore, 
that  the  new  consular  law  and  executive  order  open 
the  door  to  a  consular  career  for  any  aspiring  young 
man  is  hardly  truer  now  than  under  the  old  law. 
The  applicant  must  still  practically  obtain  the  en- 
dorsement of  the  senators  of  his  state  before  even 
being  designated  for  an  examination,  and  then  there 
is  no  assurance,  upon  passing  the  examination,  that 
he  will  receive  an  appointment  since  the  number 
designated  is  largely  in  excess  of  the  number  of 
vacancies.  Should  the  young  man,  however,  be 
successful  and  enter  the  service  there  is  more  assur- 
ance now  than  formerly  that  an  honorable  career 
will  be  open  to  him  and  that  the  government  will 
obtain  a  better  servant. 

For  bibliography    and   suggestive   topics    and   questions 
consult  the  following  chapter   (XIV). 


191 


CHAPTER   XIV. 

PUBLIC  TRADE-PROMOTING   INSTITUTIONS 
(continued) 

124.  Commercial  Attaches. — The  duties  of  dip- 
lomatic officers  are,  as  has  been  stated,  primarily 
political,  while  those  of  consular  officers  are  prin- 
cipally commercial.  Nevertheless,  many  commer- 
cial questions  are  constantly  coming  up  which 
diplomatic  officers,  because  of  their  closer  relations 
with  foreign  government,  are  often  in  a  better  situa- 
tion to  consider  than  are  consular  officers.  A  few 
countries  bridge  the  gap  between  these  two  classes 
of  officials  by  the  appointment  of  commercial  at- 
taches who  may  be  styled  commercial  diplomatic 
agents  since  they  are  both  members  of  an  embassy, 
or  legation,  and  are  employed  as  experts  on  com- 
mercial questions  arising  between  the  home  and 
foreign  governments.  Such  officials  form  a  part  of 
the  English  and  Russian  diplomatic  service,  while 
similar  officers,  called  "agricultural  attaches,"  con- 
stitute a  part  of  the  German  service.  Such  ap- 
pointments are  of  recent  origin.  The  plan  was 
inaugurated  by  England  in  1880  and  she  now  has 
seven  commercial  attaches. 

125.  Proposal  for  Commercial  Attaches  in  the 
American  Diplomatic  Service. —  The  advisability 
of  making  commercial  attaches  a  part  of  the  Ameri- 

192 


TRADE-PROMOTING    INSTITUTIONS 

can  diplomatic  service  has  been  discussed  in  the 
United  States  in  recent  years.  In  1904  an  official 
circular  letter  was  addressed  to  American  diplo- 
matic and  consular  officers  asking  for  an  expression 
of  views  on  this  subject.  The  replies  were  gen- 
erally favorable,  but  there  were  certain  objections 
advanced,  the  most  important  being  (i)  the  danger 
of  impairing  the  dignity  and  usefulness  of  diplo- 
matic officers  by  identifying  them  too  closely  with 
commercial  activities,  (2)  the  danger  of  conflict 
between  consular  and  diplomatic  officers  with  the 
possible  result  of  impairing  the  initiative  and  zeal 
of  the  former,  (3)  the  additional  expense  to  the 
government  without  the  guaranty  of  sufficient  re- 
turns. Based  upon  the  results  of  this  inquiry  a 
bill  was  drafted,  which  was  approved  by  the  Presi- 
dent, asking  Congress  to  appropriate  money  for  six 
special  agents  of  the  Department  of  State,  with  the 
diplomatic  rank  and  title  of  commercial  attache,  to 
be  appointed  by  the  President,  preferably  from  the 
consular  service,  and  to  be  assigned,  subject  to 
transfer  at  the  discretion  of  the  Secretary  of  State, 
to  embassies  and  legations,  or  to  particular  trade 
regions  or  to  such  occasional  service  in  the  Depart- 
ment of  State  as  might  be  deemed  advisable  by  the 
Secretary  of  State.  The  inspection  of  consulates 
was  to  be  a  part  of  the  duties  of  these  attaches. 
Their  salaries  were  to  be  liberal,  and  tenure  was  to 
be  during  good  behavior.  The  advocates  of  the 
law  claimed  as  advantages  (i)  that  such  officers 
would  have  more  direct  relations  with  foreign  gov- 
ernments than  the  consuls  and  would  be  in  a  posi- 
13  193 


COMMERCIAL    POLICIES 

tion  to  obtain  information  often  inaccessible  to  the 
latter;  (2)  that  they  would  keep  ambassadors  or 
ministers  more  thoroughly  informed  on  important 
commercial  questions,  and  (3)  that  they  would 
offer  an  incentive  to  more  efficient  work  on  the 
part  of  consular  officers  both  because  it  was  pro- 
posed to  favor  the  latter  in  appointments  to  these 
positions  and  because  of  the  supervisory  power  of 
the  attaches.  Congress  did  not  pass  this  bill,  but 
instead  passed  a  law  providing  for  the  appointment 
of  commercial  experts  to  carry  on  trade  investiga- 
tions in  different  parts  of  the  world  under  the  direc- 
tion of  the  Department  of  Commerce  and  Labor. 
In  the  new  consular  law  which  took  effect  on 
June  30,  1906,  Congress  also  provided,  as  has  been 
stated,  for  five  inspectors  of  consulates.  While 
these  two  laws  have  lessened  the  urgency  of  appoint- 
ing commercial  attaches,  the  writer  is  inclined  to 
believe,  from  several  years'  experience  as  secretary 
of  an  American  Embassy,  that  such  officers,  if  care- 
fully chosen,  would  amply  repay  the  small  addi- 
tional expense  to  the  service. 

126.  United  States  Treasury  Department. — 
This  department  is  charged  with  the  management 
of  the  national  finances,  and  its  importance  to  the 
foreign  commerce  of  the  country  is  due  largely  to 
the  fact  that  about  thirty-five  per  cent,  of  the  total 
federal  revenue  of  the  United  States  is  derived  from 
duties  on  imports.  The  administration  of  the  tariff 
is  largely,  therefore,  a  matter  of  the  Department  of 
the  Treasury.  The  part  played  by  the  customs 
collectors  and  by  the  local  and  general  appraisers 

194 


TRADE-PROMOTING    INSTITUTIONS 

has  been  related.  The  Customs  Division  of  this 
Department  has  important  duties  relating  to  mat- 
ters of  the  customs,  among  other  things  being 
charged  with  the  publication  of  the  decisions  of  the 
Treasury  Department  and  the  Board  of  General 
Appraisers,  the  preparation  and  promulgation  of 
rules  and  regulations  to  govern  the  official  action  of 
customs  officers,  the  ascertainment  and  establish- 
ment of  rates  of  drawback  and  rebates,  the  regula- 
tion of  the  landing  of  passengers  from  abroad  and 
the  examination  of  their  baggage.  They  also  en- 
tertain ( I )  requests  from  customs  officers  for  advice 
and  instructions  relative  to  current  procedure,  to 
the  construction  of  statutes  and  to  matters  arising 
under  special  conditions;  (2)  appeals  against  the 
collectors'  assessment  of  duty  upon  passengers' 
baggage,   household    effects,    tools    of   trade,    etc. ; 

(3)  requests  from  societies  for  the  free  entry  of 
articles    under    various    special   provisions   of   law ; 

(4)  applications  for  the  release  of  seized  goods,  for 
the  remission  or  mitigation  of  fines  and  penalties, 
and  for  relief  from  additional  duties  incurred  by 
reason  of  undervaluation;  (5)  applications  from 
the  several  executive  departments  for  the  free  entry 
of  articles  imported  by  the  United  States  and  for 
the  extension  of  courtesies  to  diplomatic  and  dis- 
tinguished passengers  on  arrival,  etc. 

127.  United  States  Department  of  Agriculture. 
— In  many  countries  agriculture  is  the  very  founda- 
tion of  commercial  prosperity.  This  is  preemi- 
nently the  case  in  the  United  States  where  good 
crops  are  practically  synonymous  with  good  times. 

195 


COMMERCIAL    POLICIES 

Anything,  therefore,  affecting  the  agricultural  con- 
ditions of  the  country  is  of  vital  interest  to  the 
American  people.  The  importance  of  agriculture 
to  the  foreign  trade  of  the  United  States  is  shown 
by  the  fact  that  in  spite  of  a  growing  tendency 
toward  increasing  consumption  of  domestic  agri- 
cultural products,  coupled  with  a  remarkable  growth 
in  the  value  of  exports  of  domestic  manufactures, 
nearly  two-thirds  of  the  value  of  the  total  export 
trade  still  consists  of  food  products  and  crude  ma- 
terials for  use  in  manufacturing.  The  Secretary  of 
Agriculture,  among  his  various  duties,  exercises 
advisory  supervision  over  the  agricultural  experi- 
ment stations  deriving  support  from  the  national 
treasury,  has  control  of  the  quarantine  stations  for 
imported  cattle,  and  of  the  inspection  of  cattle- 
carrying  vessels,  and  directs  the  inspection  of  do- 
mestic meats  and  all  imported  food  products.  He 
is  also  charged  with  the  duty  of  carrying  into  effect 
the  laws  excluding  from  importation  certain  nox- 
ious animals,  and  has  authority  to  control  the 
importation  of  other  animals.  One  of  the  most 
important  sections  of  the  Department,  so  far  as  for- 
eign commerce  is  concerned,  is  the  Bureau  of  Sta- 
tistics, which  records,  tabulates  and  coordinates 
statistics  of  agricultural  production,  distribution 
and  consumption.  The  Division  of  Foreign  Mar- 
kets, which  is  under  this  bureau,  has  for  its  object 
the  extension  of  the  agricultural  export  trade  of  the 
United  States.  It  investigates  the  requirements  of 
foreign  markets,  studies  the  conditions  of  demand 
and  supply  as  disclosed  by  the  records  of  produc- 


TRADE- PROMOTING    INSTITUTIONS 

tion,  importation  and  exportation,  inquires  into  the 
obstacles  confronting  trade  extension,  and  dissemi- 
nates through  printed  reports  and  otherwise  the 
information  collected. 

128.  United  States  Department  of  Commerce 
and  Labor. —  Many  governments  have  special  de- 
partments which  are  charged  with  the  w^ork  of 
promoting  domestic  and  foreign  commerce.  Some- 
times such  departments  have  charge  of  only  com- 
mercial matters,  but  more  often  they  are  associated 
with  allied  interests  such  as  industry,  agriculture, 
mining,  fisheries,  navigation,  labor,  etc.  In  the 
United  States  the  Department  of  Commerce  and 
Labor  was  organized  in  1903  by  the  transference  of 
several  bureaus,  boards,  etc.,  from  other  govern- 
mental departments  and  by  the  formation  of  some 
new  bureaus.  The  purpose  of  this  department,  as 
expressed  in  the  law,  is  "to  foster,  promote,  and 
develop  the  foreign  and  domestic  commerce,  the 
mining,  manufacturing,  shipping,  and  fishery  indus- 
tries, the  labor  interests,  and  the  transportation 
facilities  of  the  United  States."  The  bureaus,  or 
boards,  of  this  department  which  most  directly 
affect  American  foreign  commerce  and  commercial 
relations  are  the  (a)  Bureau  of  Statistics  and  (b) 
the  Bureau  of  Manufactures. 

(a)  Bureau  of  Statistics.  This  Bureau,  formerly 
a  part  of  the  Treasury  Department,  collects  and 
publishes  among  other  facts,  the  statistics  of  foreign 
commerce,  embracing  tables  showing  the  imports 
and  exports  both  by  countries  and  by  customs  dis- 
tricts;  the   transit  trade   inward  and   outward  by 

197 


COMMERCIAL    POLICIES 

countries  and  by  customs  districts;  imported  com- 
modities warehoused,  withdrawn  from,  and  remain- 
ing in  warehouse;  the  imports  of  merchandise 
entered  for  consumption,  showing  quantities,  value, 
rates  of  duty,  and  amounts  of  duty  collected  on 
each  article  or  class  of  articles ;  the  inward  and  out- 
ward movement  of  tonnage  in  our  foreign  trade, 
and  the  countries  whence  entered  and  for  which 
cleared,  distinguishing  the  nationality  of  the  for- 
eign vessels.  This  bureau  also  collects  information 
in  regard  to  the  leading  commercial  movements  in 
our  internal  commerce,  among  which  is  the  com- 
merce of  the  Great  Lakes,  the  commercial  move- 
ments at  interior  centres,  at  Atlantic,  Gulf  and 
Pacific  ports,  shipments  of  coal  and  coke,  ocean 
freight  rates,  etc.  This  statistical  information  is 
published  in  various  reports  of  the  Bureau,  the  most 
important  being  the  (i)  Monthly  Summary  of 
Commerce  and  Finance,  (2)  the  annual  report  on 
Commerce  and  Navigation,  and  (3)  the  Statistical 
Abstract  (annual). 

(b)  Bureau  of  Manufactures.  This  Bureau  was 
provided  for  by  the  act  of  1903  which  created  the 
new  Department  of  Commerce  and  Labor,  but  was 
not  organized  until  1905.  The  act  defines  its  duties 
in  the  following  terms:  "It  shall  be  the  province 
and  duty  of  said  Bureau,  under  the  direction  of  the 
Secretary,  to  foster,  promote  and  develop  the  va- 
rious manufacturing  industries  of  the  United  States, 
and  markets  for  the  same  at  home  and  abroad, 
domestic  and  foreign,  by  gathering,  compiling,  pub- 
Hshing,  and  supplying  all  available  and  useful  in- 


TR  A  DE-PRO  MOTTNG    INSTITUTIONS 

formation  concerning  such  industries  and  such 
markets,  and  by  such  other  methods  and  means  as 
may  be  prescribed  by  the  Secretary,  or  provided  by 
law.  And  all  consular  officers  of  the  United  States 
.  .  .  are  hereby  required,  and  it  is  made  a  part  of 
their  duty,  under  the  direction  of  the  Secretary  of 
State,  to  gather  and  compile  from  time  to  time,  use- 
ful and  material  information  and  statistics,  . 
and  to  send,  under  the  direction  of  the  Secretary  of 
State,  reports  as  often  as  required  by  the  Secretary 
of  Commerce  and  Labor  of  the  information  and 
statistics  gathered  and  compiled."  The  name  of 
the  Bureau  and  that  part  of  the  law  above  quoted 
would  seem  to  indicate  that  the  promotion  of  Ameri- 
can industry  is  the  primary,  and  the  advancement 
of  American  commerce  is  the  secondary  purpose  of 
this  bureau.  Since,  however,  the  interests  of  the 
former  are  being  adequately  cared  for  by  the  United 
States  Census  which  has  been  organized  into  a  per- 
manent bureau,  this  naturally  causes  the  Bureau  of 
Manufactures  to  emphasize  the  commercial  interests 
of  the  country.  This  inference  is  also  easily  de- 
duced from  the  assertion  of  the  Chief  of  the  latter 
Bureau  who  states  in  his  first  annual  report  that  "it 
has  been  the  special  aim  of  the  Bureau  to  inform 
our  business  men  of  the  conditions  in  foreign  mar- 
kets, the  character  and  style  of  imported  goods 
consumed,  the  tastes  and  habits  of  the  people,  and 
to  furnish  them  with  such  other  information  of  like 
character  as  would  be  useful  in  the  introduction  of 
American  products." 

The  information  gathered  by  this  Bureau  reaches 
199 


COMMERCIAL    POLICIES 

the  public  largely  through  the  "Consular  and  Trade 
Reports,"  the  publication  of  which  was  transferred 
on  July  I,  1905,  from  the  Division  of  Consular  Re- 
ports of  the  Bureau  of  Statistics  to  the  Bureau  of 
Manufactures.  These  reports  have  been  issued 
monthly  smce  1881  and  daily  since  1897,  the  former 
now  being  a  compilation  of  the  latter.  The  in- 
formation contained  in  these  publications  is  derived 
from  American  consular  and  diplomatic  officers, 
from  the  special  commercial  experts  or  agents  al- 
ready referred  to,  and  from  various  other  sources. 
The  Bureau  also  publishes  the  volume  on  the 
"Commercial  Relations  of  the  United  States"  w^hich 
has  appeared  annually  since  1855. 

129.  United  States  War  Department. — While 
the  War  Department  is  not  supposed  to  be  actively 
engaged  in  promoting  commercial  mterests,  it  does 
in  many  ways  have  an  important  influence  along 
these  lines,  especially  through  its  Engineering  De- 
partment and  its  Bureau  of  Insular  Affairs.  The 
former  is  charged,  among  other  things,  with  the 
river  and  harbor  improvements,  with  military  and 
geographical  explorations  and  surveys,  with  the  sur- 
vey of  the  lakes  and  with  any  other  engineering 
work  specially  assigned  to  it  by  acts  of  Congress 
or  orders  of  the  Secretary  of  War.  Conspicuous 
among  its  present  duties  is  the  construction  of  the 
Panama  canal. 

To  the  Chief  of  the  Bureau  of  Insular  Affairs, 
under  immediate  direction  of  the  Secretary  of  War, 
is  assigned  all  matters  pertaining  to  civil  govern- 
ment in  the  island  possessions  of  the  United  States 

200 


TRADE-PROMOTING    INSTITUTIONS 

subject  to  the  jurisdiction  of  the  War  Department. 
The  Bureau  is  the  repository  of  all  the  civil  records 
of  the  Philippines  and  of  the  late  government  of 
occupation  of  Cuba,  as  well  as  of  the  records  of 
Porto  Rico  during  the  time  in  which  the  War  De- 
partment exercised  jurisdiction  over  that  island. 
It  makes  a  comptroller's  review  of  the  expendi- 
tures and  receipts  of  the  Philippine  government, 
and  prepares  final  statements  for  presentation  to 
Congress  of  all  such  accounts.  It  makes  the  pur- 
chase and  shipment  of  supplies  in  and  from  the 
United  States  for  the  Philippine  government,  and 
a  preliminary  audit  of  all  such  expenditures  of 
Philippine  government  funds  in  the  United  States 
is  made  in  this  Bureau  before  final  accounting  of 
the  same  to  the  Philippine  government.  It  has 
charge  of  appointments  to  the  Philippine  civil 
service,  including  arrangements  for  transportation 
of  employees  and  their  families.  It  gathers  com- 
plete statistics  of  insular  commerce,  imports  and 
exports,  as  well  as  of  shipping  and  immigration, 
and  quarterly  (formerly  monthly)  summaries  of 
the  same  are  published  and  distributed.  The  Bu- 
reau of  Insular  Affairs  is  part  of  the  machinery  of 
the  Philippine  government,  and  is  the  only  office  in 
the  United  States  in  any  way  charged  with  the  civil 
government  of  the  Philippine  Islands. 

130.  Trade  Commissions. — Commissions  for  the 
investigation  of  commercial  and  industrial  condi- 
tions in  foreign  countries  are  another  important 
source  of  commercial  information  and  have  been 
influential   in   furthering  commercial   relations  be- 


C  O  M  MERCIAL     POLICIES 

tween  certain  countries.  Such  commissions  have 
sometimes  been  undertaken  by  private  or  semi- 
public  organizations,  like  the  Philadelphia  Com- 
mercial Museum,  and  less  frequently  by  individuals 
or  under  individual  initiative,  an  example  of  which 
is  the  Moseley  commission  of  England  which  re- 
cently undertook  an  investigation  of  commercial 
and  industrial  conditions  in  the  United  States.  The 
governments  of  England,  France,  Germany  and 
other  important  commercial  countries  have  also,  at 
different  times,  appointed  such  commissions.  The 
field  of  their  operation  has  generally  been  in  Eastern 
Asia,  in  different  parts  of  Africa,  or  in  other  locali- 
ties where  industrial  possibilities  are  important  but 
undeveloped,  and  where  industrial  information  is 
less  definite  than  in  the  more  advanced  countries  of 
the  w'orld.  Bills  calling  for  appropriations  to  carry 
on  investigations  in  foreign  countries,  especially  in 
the  Orient,  have  been  introduced  in  the  American 
Congress  from  time  to  time,  but  have  failed  to  be- 
come laws.  Finally,  it  may  be  mentioned  that 
various  trade  congresses  and  conventions,  which  are 
either  called  by  governments  or  by  private  organi- 
zations such  as  the  Pan-American  Congress  of  1890, 
or  the  Foreign  Commerce  Convention  of  1907  at 
Washington,  have  had  more  or  less  influence  in 
developing  international  trade  relations. 

BIBLIOGRAPHY 

Note.  For  information  regarding  appointments  and 
promotions  in  the  Consular  Service  of  United  States  ad- 
dress the  State  Department. 

B.  Brit.  Pari.  Rep.  (especially  (i)  Constitution  of 
202 


TRADE-PROMOTING    INSTITUTIONS 

Brit.  Con.  Service,  Cd.  No.  1634,  1903;  (2)  Constitution 
and  Functions  of  Ministers  of  Commerce  or  Analogous 
Branches  of  Foreign  Administration,  Cd.  1948,  1904)  ;  *Com. 
Attaches  for  U.  S..  Report  on,  House  Doc.  No.  245,  58th 
Cong.  3rd  Sess. ;  Cong.,  Directory  of  U.  S. ;  **Cons.  Reg. 
of  U.  S.;  Con.  Rep.  of  U.  S. ;  *Dept.  Com.  and  Labor, 
Organization  and  Law;  Diplom.  Officers  of  U.  S.,  Instruc- 
tions to ;  Mess,  of  Pres. ;  *Mon.  Sum.  Com.  and  Fin.  Sept. 
'02;  State  Dept.  Register  (list  of  U.  S.  Con.  and  Diplom. 
Officers,  with  salaries,  etc.);  Stat,  at  Large  of  U.  S. ; 
Wharton's  Inter.  Law  Digest  (new  ed.  by  Moore). 

C.  Almanach  de  Gotha  (list  of  Consular  and  diplom. 
officers  of  world)  ;  Diet,  and  encyc.  (especially  "Consuls" 
in  Am.  and  Eng.  Encyc.  Law,  and  "Consular-recht"  in  Con- 
rad's Handw.  der  Staatsw.)  ;  Inter.  Law  texts;  Poole's 
Index. 

D.  De  Clercg  et  de  Vallat,  Formulaire  des  Chancel- 
leries diplomat,  et  cons. ;  Foster's  Practice  of  Diplom. ; 
Jones'  Hist,  of  U.  S.  Con.  Service;  von  Konig's  Handb. 
des  deuts.  Consularw. ;  Schuyler's  Am.  Diplom.  Ch.  II. ; 
Walpole's  For.  Rel.,  Ch.  V. 

E.  Angell,  J.  B.,  et  al.  Con.  System  and  the  Spoils 
System,  Cent.  XXVI.,  306,  1894;  Emory,  F.,  U.  S.  Consul 
and  Trade,  World's  W.,  I..  751,  1901 ;  Fisk,  G.  M.,  Train- 
ing needed  for  Consular  Service,  Mich.  Pol.  Sci.  Assoc, 
V.  No.  2,  146,  Je.  '03;  Garfield,  H.  A.,  The  Business  Man 
and  Con.  Service,  Cent.,  XXXVIII.,  268,  1900;  Johnson, 
E.  R.,  Early  Hist,  of  Con.  Service,  Pol.  Sci.  Q.,  XIII.,  19, 
1898;  Loomis,  F.  B.,  Reorganization  of  Con.  Service,  N. 
Am.  R.,  CLXXXII.,  356,  1907;  McAneny,  G.,  Con.  Systems 
of  Foreign  Countries,  Cent.,  XXXV.,  604,  1898;  Monaghan, 
J.  C,  Essential  Elements  in  the  Educ.  of  a  U.  S.  Consular 
Officer,  Mich.  Pol.  Sci.  Assoc.  V.,  No.  2,  163,  Je.  '03;  Os- 
borne, J.  B.,  Am.  Consul  and  Foreign  Trade,  Atlan.  XCIV, 
159,  1907,  same  in  R.  of  Rs.  Mr.  '07;  Parker,  G.  F.,  U.  S. 
Con.  Serv.  Atlan.  LXXXV.,  909,  My.  '97;  Powell,  B.  E., 
Jefiferson  and  the  Con.  Service,  Pol.  Sci.  Q.,  D.  '06;  Rock- 
hill,  W.  W.,  Evils  to  be  remedied  in  the  Con.  Serv.,  Forum, 

203 


COMMERCIAL    POLICIES 

XXII.,  673,   1896-7;   Washburn,  A.   H.,  Inspection   of  the 
Con.  Service,  Forum,  XXX.,  28,  1900. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  What  is  the  exact  relation  between  the  Bureau  of 
Trade  Relations  and  the  Bureau  of  ^Manufactures  as  re- 
gards consular  reports?  May  the  latter  communicate 
directly  with  consuls? 

2.  May  a  consul  ever  act  officially  without  an  exequa- 
tur? Suppose  a  foreign  government  should  refuse  the 
exequatur?  May  it  do  so  without  a  good  reason?  Sup- 
pose the  home  government  does  not  think  the  reason  a 
valid  one?  (texts  on  Inter.  Law;  also  Con.  Reg.  of  U.  S.) 

3.  Referring  to  the  Executive  Order  of  June  27, 
1906  (Sec.  12)  suppose  that  Illinois  is  entitled  to  an  addi- 
tional consul  and  Indiana  is  not,  but  of  two  candidates 
from  these  states  the  one  from  Indiana  passed  the  better 
examination,  what  would  happen? 

4.  Is  there  anything  to  be  said  in  favor  of  the  "spoils 
system"  as  applied  to  the  United  States  Consular  service? 
How  does  the  American  service  compare  in  efficiency  with 
the  European  service?  If  favorably  is  this  an  argument  in 
favor  of  the  "spoils  system?" 

5.  Explain  the  statement  in  the  text  that  inadequate 
compensation  resulted  in  the  exaction  of  excessive  fees 
and  in  the  creation  of  consular  agencies  in  order  to  in- 
crease salaries. 

6.  In  the  matter  of  consular  appointments  is  the  im- 
portant thing  to  give  every  one  a  show  or  to  get  good 
men?  Suppose  every  one  were  allowed  to  take  the  con- 
sular examination  and  one  million  young  men  took  the  ex- 
amination annually.  Would  this  be  desirable?  Would 
there  be  any  more  assurance  of  good  appointments  than 
under  the  present  plan? 

7.  What  is  meant  by  the  statement  that  a  consul  is 
accredited  by  the  Secretary  of  State?  (texts  on  Inter.  Law; 
also  Con.  Reg.  of  U.  S.). 

204 


TRADE- PROMOTING    INSTITUTIONS 

8.  If  a  consul  engage  in  trade  is  he  entitled  to  the  gen- 
eral immunities  of  his  office?  (Coppell  v.  Hall,  7  Wall 
[U.  S.]  553). 

9.  What  was  the  law  of  1864  relating  to  consular 
clerks?  What  was  its  purpose?  Was  its  purpose  ful- 
filled? (R.  S.  of  U.  S.,  Sec.  1705;  also  Foster's  Practice 
of  Diplomacy). 

10.  What  are  the  duties  of  British  commercial  at- 
taches? Is  there  more  reason  for  such  attaches  in  the 
British  than  in  the  American  diplomatic  service?  (House 
Doc.  No.  245,  58th  Cong.  3rd  session). 

11.  What  are  the  views  of  the  following  regarding 
the  appointment  of  commercial  attaches  in  the  American 
diplomatic  service :  President  Roosevelt,  Ex- Assistant 
Secretary  of  State  Loomis,  Consul  General  Mason,  Ex- 
Ambassador  Porter  and  Ministers  Hill  and  Jackson? 
(Consult  reference  in  preceding  question). 

12.  What  is  the  present  cost  of  the  Consular  service 
to  the  United  States  government?  Is  it  greater  now  than 
under  the  old  law?  If  so,  is  this  an  argument  against  the 
present  law? 

13.  What  check  has  the  Government  on  the  fees  re- 
ceived by  a  consul?     (Law  of  Apr.  5,  1906,  Sec.  10). 

14.  The  American  law  allows  annual  leaves  of  absence. 
Suppose  a  consul  does  not  avail  himself  of  this  one  year 
may  the  length  of  his  leave  be  doubled  the  next  year? 
Suppose  a  consul  in  Class  III.  is  on  leave,  what  is  the 
salary  of  the  vice-consul  during  his  absence?  Suppose 
the  consul  is  absent  longer  than  sixty  days?  (Con.  Reg. 
of  U.  S.). 


20s 


CHAPTER  XV. 

QUASI-PUBLIC  AND    PRIVATE   TRADE-PROMOT- 
ING  INSTITUTIONS 

131.  General. —  Besides  the  governmental  trade- 
promoting  agencies  already  considered  there  are 
various  other  institutions  of  a  private  or  quasi-pub- 
lic character  which  have  for  their  primary  aim  the 
advancement  of  foreign  commerce  and  commercial 
relations.  Among  such  agencies  may  be  mentioned 
commercial  museums,  information  bureaus,  export 
sample  warehouses,  domestic  chambers  of  com- 
merce in  foreign  countries,  export  banks,  export 
syndicates  or  companies,  foreign  mercantile  agen- 
cies and  domestic  chambers  of  commerce  and  boards 
of  trade.  Perhaps  also  in  this  category  we  should 
include  various  trade  associations,  customs  brokers 
and  the  three  important  agencies  by  means  of  which 
foreign  purchases  and  sales  are  usually  made,  (i) 
offices  established  abroad  and  either  in  the  hands  of 
natives  or  foreigners;  (2)  domestic  traveling  buy- 
ers or  sellers  in  foreign  countries ;  or  (3)  foreign 
buyers  or  sellers  traveling  outside  of  their  country. 
The  larger  importers  and  exporters  often  buy  and 
sell  in  all  three  ways.  Such  agencies,  however,  be- 
long rather  to  the  technique  than  to  the  politics  of 
foreign  trade. 

206 


TRADE- PROMOTING    INSTITUTIONS 

132.  Commercial  Museums  and  Bureaus  of  In- 
formation.—  A  commercial  museum,  in  its  restricted 
sense,  is  a  depository  in  which  are  found  samples  of 
commercial  products  from  different  parts  of  the 
world,  arranged  geographically,  with  reference  to 
their  degree  of  manufacture,  alphabetically  or  in 
some  other  manner  which  meets  the  convenience  of 
merchants  and  aids  them  in  furthering  their  foreign 
trade  relations.  Since,  however,  the  information 
conveyed  by  mere  samples  is  entirely  inadequate  for 
the  practical  use  of  merchants,  the  scope  of  many 
commercial  museums  has  been  greatly  extended  by 
the  addition  of  various  bureaus  which  give  informa- 
tion to  the  exporter  regarding  general  or  special 
trade  conditions,  customs  duties  and  regulations, 
freight  rates,  credit  of  individual  firms,  etc.  in  par- 
ticular countries.  The  enormous  expense  involved 
in  the  collection,  storage,  maintenance  and  keeping 
up  to  date  of  samples  of  commercial  products  has 
caused  this  feature  of  the  work  to  be  minimized 
and  emphasis  to  be  laid  upon  the  collecting  and  im- 
parting of  commercial  information.  In  fact,  many 
institutions  of  this  kind  have  given  up  the  first 
named  function. 

Commercial  museums  on  an  enlarged  plan  have 
been  organized  in  recent  years  in  several  European 
countries,  in  Japan  and  in  the  United  States.  The 
most  important  one  in  this  country  and  probably  the 
largest  institution  of  its  kind  in  the  world  is  the 
Philadelphia  Commercial  Museum,  which  has  served 
as  a  prototype  for  similar  institutions  both  in  this 
country  and  abroad. 

207 


COMMERCIAL    POLICIES 

133.  The  Philadelphia  Commercial  Museum. — 
This  establishment  owes  its  existence  largely  to  the 
untiring  energy  and  perseverance  of  its  director,  Mr. 
William  P.  Wilson.  It  was  established  by  a  mu- 
nicipal ordinance  in  1894  and  is  supported  by  annual 
municipal  appropriations,  by  occasional  state  and 
federal  grants,  by  membership  subscriptions  and 
gifts,  especially  of  exhibits  from  various  exposi- 
tions, notably  from  the  World's  Columbian  Exposi- 
tion in  1893.  The  government  of  the  museum  is 
administered  by  a  board  of  trustees  who  are  ap- 
pointed for  life  and  serve  without  remuneration. 
The  work  of  the  Institution  is  supervised  by  an  ad- 
visory board  composed  of  representatives  of  the 
most  important  trade  organizations  of  the  country. 
The  principal  purpose  of  the  museum  is  to  assist 
American  manufacturers  and  merchants  in  securing 
foreign  markets,  in  forming  connections  abroad  and 
in  putting  foreign  buyers  in  touch  with  American 
sellers.  Its  service  to  its  members  includes  (i) 
furnishing  lists  of  foreign  importers,  dealers  and 
large  consumers  together  with  their  reputed  com- 
mercial standing,  (2)  supplying  reports  on  trade 
conditions,  business  opportunities,  and  new  enter- 
prises, this  information  being  imparted  in  the  form 
of  type-written  reports,  special  publications,  or  per- 
sonal letters,  (3)  carrying  on  special  trade  investi- 
gations in  foreign  countries,  (4)  advising  as  to  the 
establishment  of  foreign  agencies  and  rendering 
assistance  in  securing  reliable  agents,  (5)  notifying 
home  merchants  of  all  inquiries  from  foreigners  de- 
siring to  purchase  American  goods,  (6)  translating 

208 


TRADE-PROMOTING    INSTITUTIONS 

business  correspondence,  etc.  The  Institution  has 
probably  the  most  complete  commercial  library  and 
collection  of  commercial  samples  in  the  world.  It 
maintains  a  weekly  bulletin  and  a  monthly  peri- 
odical besides  publishing  from  time  to  time  exten- 
sive trade  reports,  statistical  data,  charts,  etc.  From 
its  immense  store-house  of  sample  commercial  pro- 
ducts it  has  distributed  to  secondary  schools  several 
hundred  collections  with  photographs  for  the  pur- 
pose of  facilitating  instruction  in  commercial  sub- 
jects such  as  commercial  geography.  The  plant  of 
the  museum,  located  in  West  Philadelphia,  consists 
of  several  brick  and  steel  buildings  besides  other 
structures. 

134.  Export  Sample  Warehouses. — Export 
sample  warehouses  are  warehouses  containing  sam- 
ples of  domestic  goods.  They  may  be  located  either 
at  home  or  abroad  but  differ  from  commercial  mu- 
seums in  that  the  collections  of  the  latter  consist 
more  particularly  of  foreign  samples.  The  general 
purposes  of  both  institutions  are,  however,  the  same 
• — the  extension  of  foreign  markets,  but  their  point 
of  departure  is  different.  Commercial  museums 
serve,  in  the  first  instance,  domestic  producers  by 
showing  them  what  articles  must  be  manufactured 
and  how  they  must  be  prepared  in  order  to  meet  the 
needs  and  tastes  of  foreign  purchasers,  while  ex- 
port sample  warehouses  are  institutions  which  are 
primarily  concerned  with  foreign  consumers  since 
they  make  them  acquainted  with  domestic  goods  and 
seek  to  arrange  commercial  connections  between 
them  and  home  merchants  and  manufacturers. 
14  209 


COMMERCIAL    POLICIES 

■These  organizations,  therefore,  not  only  serve  as  ad- 
vertisers but  also  frequently  undertake  the  role  of 
agents  since  orders  are  often  accepted  by  them  and 
the  goods  delivered  through  their  intermediation. 
While  export  sample  warehouses  do,  in  many  cases, 
meet  the  demands  of  business  they  have  hardly  ful- 
filled the  highest  expectations.  International  com- 
petition is  generally  so  intense  that  the  personal  vis- 
its of  experienced  commercial  travelers  with  attract- 
ive samples  and  favorable  credit  conditions  produce 
more  practical  results. 

The  first  export  sample  warehouse  was  organized 
in  Stuttgart  in  1881.  It  soon  established  branches 
in  other  cities  of  Germany  and  in  foreign  countries, 
especially  in  the  Levant.  Similar  institutions  have 
been  organized  in  other  domestic  and  foreign  trade 
centres  under  German  management,  the  one  at  Berlin, 
founded  in  1897,  combining  the  features  of  a  sample 
warehouse  and  information  bureau.  Other  Euro- 
pean countries  have  followed  Germany's  example. 
Two  export  sample  warehouses  have  been  estab- 
lished in  recent  years  at  Caracas  and  Shanghai  un- 
der the  auspices  of  the  National  Association  of 
Manufacturers  of  the  United  States  but  both  have 
been  given  up.  Warehouses  containing  samples  of 
American  goods  have  also  been  established  in  other 
foreign  trade  centres  by  private  individuals  who 
generally  combine  the  function  of  agency  with  that 
of  exhibiting  samples. 

135.  Domestic  Chambers  of  Commerce  in 
Foreign  Countries. —  Home  business  men  often 
establish  chambers  of  commerce  in  important  com- 

210 


TRADE-PROMOTING    INSTITUTIONS 

mercial  centres  of  foreign  countries  where  they 
temporarily  reside  or  have  business  relations.  Usu- 
ally these  institutions  are  voluntary  associations  al- 
though in  some  instances  financial  support  is  given 
them  by  the  home  government.  Their  organization 
is  generally  modelled  after  similar  institutions  at 
home.  Several  American  chambers  of  commerce 
have  been  established  in  foreign  countries  the  old- 
est being  the  one  founded  in  Liverpool  in  i8or. 
The  American  chamber  at  Paris  is  one  of  the  most 
active,  while  the  one  at  Berlin,  founded  in  1903,  is 
one  of  the  most  recent.  The  aim  and  scope  of  the 
Berlin  chamber — which  is  typical  of  all  such  insti- 
tutions— is  primarily  to  furnish  information  on  all 
questions  involving  trade  between  Germany  and  the 
United  States.  New  laws  affecting  German-Ameri- 
can trade  are  brought  to  the  attention  of  members 
of  the  association.  The  governing  officers  of  the 
chamber  consist  of  a  president,  vice-president,  treas- 
urer, board  of  directors  and  secretary,  the  last- 
named  being  the  only  paid  official.  Meetings  are 
held  regularly  for  the  discussion  of  trade  subjects. 
The  institution  is  supported  by  membership  sub- 
scriptions. 

136.  Export  Syndicates. — A  practical  method  of 
developing  foreign  trade  is  by  means  of  export 
syndicates.  Such  associations  are  found  in  certain 
European  countries,  especially  in  Italy  and  in  Aus- 
tria. In  the  former  country  an  institution  of  this 
kind,  comprising  over  one  hundred  firms,  was  or- 
ganized in  1897  for  the  purpose  of  developing  trade 
relations  with  the  Orient.     The  governing  body  is 

211 


COMMERCIAL    POLICIES 

vested  in  a  committee  of  five  with  headquarters  in 
Milan.  Its  principal  duty  is  to  arbitrate  in  cases 
of  dispute  and  the  association  is  supported  by  mem- 
bership fees,  ^klembers  in  carrying  on  trade  in  the 
Orient  must  employ  the  agents  of  the  syndicate, 
who  receive  stipulated  commissions  and  remunera- 
tion for  special  expenses  attached  to  correspond- 
ence, sending  of  telegrams  and  the  like.  A  similar 
export  company  with  a  large  capital  stock  was  or- 
ganized in  Austria  in  1898.  The  headquarters  of 
the  association  is  at  \"ienna  and  branch  establish- 
ments are  located  at  Trieste  and  at  numerous  for- 
eign commercial  centres.  It  carries  on  an  extensive 
export  and  import  business  for  its  own  members  and 
also  for  non-members,  charging  the  latter  a  regular 
commission.  Among  other  ways  it  furthers  foreign 
trade  by  making  cash  advancements  upon  bills  of 
lading,  bills  of  exchange,  insurance  policies  and  the 
like. 

An  important  export  company  is  represented  by 
the  export  bank  which  was  formed  at  Berlin  in  1880. 
It  maintains  over  one  thousand  reporters  in  foreign 
countries  who  keep  the  central  institution  informed 
regarding  the  financial  standing  of  foreign  firms. 
The  bank  undertakes  such  functions  as  the  adjust- 
ment of  business  enterprises  and  legal  complications, 
the  sending  out  of  commercial  travelers,  the  estab- 
lishing of  agencies,  the  arranging  for  exhibits  of 
German  goods  in  foreign  countries  and  the  furnish- 
ing of  such  information  as  is  caluculated  to  facili- 
tate the  development  of  Germany's  foreign  trade. 
In  general  its  efforts  are  directed  toward  the  finan- 

212 


TRADE-PROMOTING    INSTITUTIONS 

cing  of  German  business  undertakings  in  foreign 
countries. 

In  this  category  also  belong  the  great  mercantile 
agencies  of  modern  civilized  countries  such  as  Dun 
and  Bradstreet.  They  are  institutions  established 
mainly  for  the  purpose  of  obtaining  information  as 
to  the  character,  personal  responsibility  and  finan- 
cial standing  of  individuals,  firms  or  corporations. 
Their  estimate  in  these  respects,  derived  from  the 
reports  of  their  agents,  is  known  as  "commercial 
rating"  and  is  furnished  to  subscribers  for  a  moder- 
ate consideration.  The  scope  of  these  institutions 
has  developed  from  a  local  or  national  to  an  inter- 
national character. 

137.  Miscellaneous  Trade-Promoting  Institu- 
tions.—  There  is  a  large  number  of  trade  associa- 
tions in  different  countries  the  activities  of  which 
are  more  or  less  directed  toward  the  development  of 
foreign  trade — such  as  boards  of  trade  or  chambers 
of  commerce.  While  these  associations  in  inland 
cities  are  primarily  interested  in  domestic  commerce, 
chambers  of  commerce  located  in  commercial  cen- 
tres like  New  York,  Liverpool  or  Hamburg  are 
largely  engaged  in  promoting  the  interests  of  for- 
eign commerce. 

Many  national  associations  like  the  National  As- 
sociation of  Manufacturers  of  the  United  States  are 
active  in  the  promotion  of  trade  with  foreign  coun- 
tries. The  intensity  of  their  activity  in  this  direc- 
tion depends  largely  upon  the  national  economic 
trend.  In  countries  like  Great  Britain  or  Germany, 
for  example,  where  the  interests  of  foreign   com- 

213 


COMMERCIAL    POLICIES 

merce  are  relatively  very  important  we  find  national 
industrial  or  commercial  associations  of  all  kinds 
more  solicitous  for  foreign  trade  than  similar  insti- 
tutions in  a  country  like  the  United  States  where, 
up  to  the  present  time,  the  interests  of  domestic  com- 
merce more  largely  predominate.  Finally  we  find 
a  large  number  of  merchants  in  the  great  commer- 
cial centres  of  the  different  countries  whose  deal- 
ings are  world-wide.  Many  of  these  do  not  rely, 
except  incidentally,  upon  the  various  private  or  pub- 
lic trade-promoting  agencies,  but  create  such  insti- 
tutions on  their  own  account.  It  is  said,  for  ex- 
ample, that  Mr.  Armour  the  great  grain  dealer  of 
Chicago,  has  agents  in  all  the  important  grain-pro- 
ducing and  grain-consuming  countries  of  the  world 
with  whom  he  is  in  constant  communication. 

BIBLIOGRAPHY 

A.  Consult  bibliography  of  Chapter  XIV. 

B.  Brit.  Pari.  Rep.  (especially  Constitution  and  Func- 
tions of  Ministers  of  Commerce  and  Analogous  Branches 
Cd.  No.  1849,  1904)  ;  Commercial  Organizations,  List  of, 
Compiled  by  Interstate  Commerce  Commission ;  Consular 
Reports    (American  and  Brit.)  ;   Indus.    Com.   Rep. 

C.  Chambers  of  Commerce,  Annual  Reports  of;  Diet, 
and  encyc.  (especially  *"Commercial  Organizations"  in 
Encyc.  Amer.,  "Handelskammern"  in  Conrad's  Handw. 
der  Staatsw.  and  in  Elster's  Worterb  der  Volksw.,  and 
♦"Trade  Organizations"  in  Encyc.  Brit.  Vol.  XXXIII.) ; 
*Poole's  Index. 

D.  Grunzel's  Handelsp.,  pp.  588-603. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 
I.     Explain  the  scope  of  the  following  trade  organiza- 
tions;   (i)    British  Commercial  Intelligence  Bureau  Limit- 
ed;   (2)    British   Commercial   Intelligence    Branch   of  the 

214 


TRADE-PROMOTING    INSTITUTIONS 

Board  of  Trade;   (3)   French  National  Office  for  Foreign 
Trade    (Art.  "Trade  Organizations"  in  Encyc.  Brit). 

2.  What  official  organizations  do  England,  France  and 
Germany  have  for  the  promoting  of  their  colonial  trade? 
(Same  reference  as  in  question  one). 

3.  Explain  the  scope  and  organization  of  British  and 
French  chambers  of  commerce  in  foreign  countries.  Does 
Germany  favor  such  institutions?  (Same  reference  as  in 
question  one). 

4.  Is  a  merchant,  like  Mr.  Armour,  who  maintains 
special  agents  all  over  the  world  in  any  better  economic 
position  than  the  man  who  relies  for  his  mformation  on 
various  public  and  private  trade-promoting  agencies  such 
as  those  mentioned  in  the  text?  If  so,  aoes  this  mean 
that  the  many  who  rely  on  the  latter  are  to  succumb  to  the 
few  who  are  able  to  maintain  the  former? 

5.  Is  the  work  of  the  commercial  museum  duplicated 
by  other  public  or  private  agencies?  How  about  Mercan- 
tile agencies? 

5.  Does  the  government  of  the  United  States  do  any- 
thing in  the  way  of  collecting  and  distributing  commercial 
samples?  (Consult  report  for  1906  of  the  chief  of  the 
Bureau  of  Manufactures). 

7.  Describe  the  organization  of  a  mercantile  agency 
like  Dun  or  Bradstreet.  What  does  it  do  to  foster  foreign 
trade? 

8.  Study  the  annual  proceedings,  constitution  and  by- 
laws of  some  chamber  of  commerce  like  New  York,  Boston, 
Philadelphia,  or  Liverpool,  and  note  in  what  ways  the  in- 
terests of  foreign  trade  are  promoted  by  one  or  more  of 
them. 

9.  Can  you  give  any  examples  of  American  consuls 
establishing  export  sample  warehouses  in  their  consular 
districts  (see  index  to  Consular  Reports)  ? 

10.  Can  you  give  the  history  of  the  sample  ware- 
houses established  at  Caracas  and  Shanghai  by  the  Nation- 
al Association  of  Manufacturers  of  the  United  States  a  few 
years   ago?     (Index  to  U.   S.   Con.   Rep.). 

215 


CHAPTER  XVI. 

COMMERCIAL  STATISTICS,  BALANCE  OF  TRADE 
AND  FOREIGN  EXCHANGE 

138.  Definition  of  Commercial  Statistics. — Sta- 
tistics are  a  description  of  any  class  of  facts  ex- 
pressed by  means  of  figures.  Commercial  statistics 
therefore  have  to  do  with  the  numerical  representa- 
tions of  the  facts  of  commerce.  They  relate  both 
to  domestic  and  foreign  commerce  but  inasmuch 
as  goods  passing  the  frontier  are  subject  much  more 
efficiently  to  statistical  control  than  those  figuring 
only  in  the  internal  trade  of  a  country,  commercial 
statistics  have  to  do  primarily  with  the  facts  of  for- 
eign commerce  although  in  recent  years  the  more 
advanced  countries  have  improved  their  method  of 
collecting  and  classifying  statistics  referring  to 
domestic  commerce.  Commercial  statistics  might 
be  characterized  as  an  instantaneous  photograph  of 
commercial  conditions  expressed  in  figures.  Their 
increasing  reliability  and  accessibility  coupled  with 
growing  competition  in  the  field  of  commerce  tend 
to  render  them  more  and  more  important  both  to 
the  individual  merchant,  by  furnishing  data  which 
enable  him  to  undertake  business  transactions  more 
intelligently,  and  to  the  government,  by  providing 
it  with  facts  which  help  it  in  carrying  out  more  in- 

216 


COMMERCIAL    STATISTICS 

telligently  its  policies  regarding  commerce  and  in- 
dustry. 

139.  Classification  of  Commercial  Statistics. — 
Commercial  statistics  to  be  of  value  should  give  de- 
tailed and  properly  classified  information  regarding 
trade.  This  should  include  the  "general  com- 
merce," that  is,  all  merchandise  both  in  sum  totals 
and  by  articles,  which  pass  the  frontier  as  exports 
and  imports,  and  the  "special  commerce"  which 
comprises  only  that  part  of  the  imports  which  is 
consumed  in  the  country  and  those  exports  which 
are  of  domestic  origin.  Commercial  statistics  should 
also  give  specific  information  concerning  imported 
merchandise  remaining  in  warehouses  and  that  part 
entering  in  transitu.  They  usually  register  im- 
ported and  exported  merchandise  not  only  by  sum 
totals  and  by  articles  but  also  by  customs  districts 
and  by  countries  as  well  as  that  which  is  dutiable 
and  free  of  duty,  with  the  percentages  of  each. 
With  reference  to  the  degree  of  manufacture  a 
common  statistical  classification  in  many  countries 
is  that  of  food  products,  raw  materials  for  manufac- 
ture, half-manufactured  products,  and  manufac- 
tures. The  values  of  American  imports  and  ex- 
ports by  articles,  grouped  according  to  the  degree 
of  manufacture  and  uses  during  the  year  ending 
June  30,  1906,  are,  according  to  the  new  classifica- 
tion adopted  July  i,  1906,  as  follows; 


217 


COMMERCIAL    POLICIES 


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2l8 


COMMERCIAL    STATISTICS 

In  the  commercial  statistics  of  most  advanced 
countries  gold  and  silver  coin  and  bullion  are  sepa- 
rated from  other  forms  of  merchandise.  While 
such  statistics  admit  of  various  groupings  and 
classifications  to  meet  local  or  national  demands,  in 
a  general  way,  the  method  followed  has  reference 
to  the  needs  of  a  nation's  revenue. 

140.  General  Methods  of  Obtaining  Commer- 
cial Statistics. —  Statistical  information  regarding 
commerce  is  based  upon  one  or  more  of  the  elements 
of  weight,  measure  or  value.  For  some  commodi- 
ties, such  as  coal  or  iron,  weight  is  the  important 
factor;  for  other  articles,  like  grain,  petroleum  or 
eggs,  measure  is  the  chief  characteristic,  while  for 
many  objects,  like  diamonds  and  other  precious 
stones,  value  is  the  more  important  attribute.  Sta- 
tistical information,  however,  generally  registers 
both  value  and  either  weight  or  measure.  Thus 
coal  or  iron  shows  the  value  per  ton,  grain  or  eggs 
the  value  per  bushel  or  dozen  and  diamonds  the 
value  per  carat.  The  obtaining  of  statistical  infor- 
mation based  upon  weight  or  measure  is  compara- 
tively easy,  but  that  based  on  value  is,  for  reasons 
previously  stated,  more  difficult.  There  are  two 
general  methods  in  vogue  for  the  latter,  one  may 
be  styled  the  method  of  value  declaration,  the  other 
of  value  estimation.  By  the  former  method  the 
value  of  goods  is  based  primarily  upon  the  declara- 
tion of  the  exporter  or  importer  at  the  time  goods 
pass  the  frontier,  customs  officials  havmg  certain 
powers  to  correct  manifest  inaccuracies  in  the  de- 
clared value.     Such  is  the  system  in  vogue  m  Great 

219 


COMMERCIAL    POLICIES 

Britain.  By  the  method  of  estimation  the  value  of 
goods  is  usually  determined  by  an  expert  commis- 
sion of  manufacturers,  merchants  and  government 
officials  which  fixes  from  time  to  time  for  each  ar- 
ticle an  average  price,  based  upon  the  average  price 
of  the  article  for  the  preceding  year  Such  a  system 
is  substantially  in  vogue  in  Germany,  France,  Aus- 
tria-Hungary, Italy  and  Russia,  while  Switzerland 
and  Belgium  have  a  combination  of  both  methods 
of  valuation. 

141.  American  Methods  of  Obtaining  Commer- 
cial Statistics. —  The  manner  of  obtaining  com- 
mercial statistics  m  the  United  States  has  been  sug- 
gested in  a  previous  chapter.  It  is  based  upon  the 
method  of  declaration  coupled  with  very  extensive 
supervisory  powers  granted  primarily  to  the 
Treasury  Department.  All  merchandise  imported 
into  the  United  States,  with  few  exceptions 
must  be  accompanied,  as  has  been  said,  by  an 
invoice  containing  ample  information  regarding 
the  quantity,  quality  and  value  of  the  goods,  sworn 
to  before  an  American  consul  in  the  district  from 
whence  the  goods  were  exported.  These  invoice 
valuations  are  summarized  and  issued  annually  (for- 
merly quarterly  also)  by  the  Bureau  of  Statistics  of 
the  Department  of  Commerce  and  Labor,  under  the 
title  "Exports  declared  for  the  United  States." 

The  statistical  information  regarding  the  foreign 
commerce  of  the  United  States  published  by  this 
Bureau  is  furnished  by  the  various  collectors  of 
customs  of  the  Treasury  Department.  The  statis- 
tics of  imports  are  based  upon  consular  invoices, 

220 


COMMERCIAL    STATISTICS 

sworn  statements  of  importers  and  examination  and 
appraisement   by  customs  officials.     Export  statis- 
tics are  based  upon  manifests  containing,  like  con- 
sular   invoices,    ample    information    regarding    the 
quantity,  quality  and  value  of  the  goods,  which  must 
be  sworn  to  by  owners  and  shippers.     These  returns 
of  foreign  commerce  are  compiled  and  tabulated  by 
the  Bureau  of  Statistics  of  the  Department  of  Com- 
merce and  Labor  and  published  monthly,  annually 
and  at  other  intervals,  the  most  important  publica- 
tions of  the  Bureau  being  the  Monthly  Summary  of 
Commerce  and  Finance,  the  Statistical  abstract  of 
the  United  States  and  the  volume  on  Commerce  and 
Navigation,  the  last  two  being  published  annually. 
142.  Difficulties  of   Statistical  Comparisons.— 
Many  obstacles  prevent  satisfactory  statistical  com- 
parisons in  matters  of  trade,  notably  among  these 
difficulties    being   the    diversities    in    standards    of 
weight,  measure,  and  value.     The  basis  for  deter- 
mining value  may  be  the  wholesale  or  retail  price 
and  may  or  may  not  include  packing,  freight,  etc. 
In  the  United  States,  as  previously  stated,  value  in 
this  connection  refers  to  the  wholesale  price,  includ- 
ing packing,   in  the  country  where  the  goods  are 
piu-chased.     Another    confusion    arises     regarding 
what  constitutes  the  country  of  origin  and  the  coun- 
try of  destination.     The  former  may  be  the  coun- 
try in  which  the  article  is  produced  or  manufactured, 
as  is  the  case  in  the  American  statistics,  or  that  from 
which  the  article  is  exported.     The  country  of  des- 
tination may  refer,  (i)  to  the  country  in  which  the 
exported   article   is  finally  consumed,    (2)    to   the 

221 


COMMERCIAL    POLICIES 

country  to  which  it  is  sold,  or  (3)  to  the  country  to 
which  it  is  first  shipped.  For  American  cotton 
shipped  via  Belgium  to  a  German  merchant  but  in- 
tended for  consumption  in  Switzerland  the  country 
of  destination  would  be,  in  the  first  instance,  Swit- 
zerland, in  the  second  instance,  Germany,  and  in  the 
last  instance,  Belgium.  The  American  regulation 
requires  that  the  country  to  which  merchandise 
is  reported  as  exported  should  be  the  country  to 
which  it  is  destined  for  a  market. 

Again,  another  difficulty  in  the  comparison  of 
commercial  statistics  is  due  to  the  fact  that  the 
economic  and  political  boundaries  of  many  coun- 
tries are  not  coextensive.  For  example  in  the 
United  States  for  statistical  purposes  the  non-con- 
tiguous territories  are  not  a  part  of  the  Republic. 

Finally,  the  comparison  of  commercial  statistics  is 
rendered  difficult  by  constant  changes  in  political 
boundaries.  American  imports  and  exports  at  the 
present  time  refer  to  a  territory  three  times  as  ex- 
tensive as  at  the  time  of  the  adoption  of  the  Consti- 
tution, while  in  1871  that  part  of  France  known  as 
Alsace-Lorraine  was  absorbed  by  Germany  so  that 
imports  into  and  exports  from  those  provinces  prior 
to  that  date  were  reckoned  in  the  French  statistics 
and  since  then  are  included  in  the  statistics  of  the 
German  Empire. 

143.  Methods  of  Statistical  Comparisons. — In 
order  to  make  effectual  use  of  the  mass  of  statistical 
material  the  student  must  simplify  this  material  for 
purposes  of  comparison.  If  the  data  include  incon- 
gruous elements  they  must  be  reduced  to  a  common 


COMMERCIAL    STATISTICS 

denominator.  One  method  of  making  statistical 
comparisons  is  to  employ  percentages.  An  error  is 
likely  to  arise  by  this  method  from  a  failure  to  ob- 
serve the  basal  numbers  upon  which  percentages  are 
computed.  For  example  an  increase  of  $100,000  in 
the  value  of  the  exports  of  a  country  whose  exports 
at  a  previous  date  were  valued  at  only  $1000  would 
show  a  higher  percentage  of  increase  than  would  an 
increase  of  over  $200,000,000  in  the  case  of  a  coun- 
try whose  exports  were  previously  in  the  same  way 
valued  at  $5,000,000.  In  using  percentages  one 
must  remember  one  is  dealing  with  ratios  and  not 
with  absolute  facts. 

A  second  method  of  statistical  comparison  is  by 
averages.  Exports  and  imports  vary  greatly  from 
year  to  year  so  that  false  conclusions  might  be 
drawn  from  a  comparison  of  single  years.  For  ex- 
ample, the  value  of  American  imports  in  1891  ex- 
ceeded its  value  in  1890,  while  imports  in  1893  were 
much  greater  in  value  than  those  of  1894.  From 
the  former  one  might  infer  that  American  imports 
were  increasing  in  value  and  from  the  latter  the  op- 
posite inference  might  be  drawn.  Such  inaccura- 
cies are  largely  remedied  by  comparing  the  general 
average  of  several  years.  We  find,  for  instance,  that 
the  value  of  American  imports,  averaged  during  the 
last  decade,  is  in  excess  of  its  average  value  for  the 
preceding  ten  years.  We  are  more  warranted,  there- 
fore, than  in  the  instance  cited  above,  of  inferring 
that  American  import  trade  is  registering  an  in- 
crease in  value. 

A  third  method  of  statistical  comparison,  which 
223 


COMMERCIAL    POLICIES 

is  sometimes  used  to  determine  variations  in  gen- 
eral prices  for  a  series  of  years  and  especially  to 
show  changes  which  take  place  in  the  purchasing 
power  of  the  precious  metals,  is  the  system  of  in- 
dex numbers.  The  prices  of  a  large  number  of 
commodities  are  determined  for  a  given  year  and 
each  is  usually  called  lOO  as  a  basis  of  comparison. 
If  one  hundred  commodities  be  taken,  the  index 
number  would  then  be  lOO  x  lOO  or  10,000.  Sup- 
pose at  the  end  of  the  first  year  the  price  of  twenty 
commodities  has  risen  ten  per  cent.,  on  an  average, 
that  the  price  of  sixty  has  fallen  five  per  cent.,  on  an 
average  and  that  the  price  of  the  remaining  has  re- 
mained unchanged.  We  would  then  have  the  fol- 
lowing result : 

20  X   no 2,200 

60  X     95 5,700 

20  X   100 2,000 

9,900 
The  index  number  for  the  second  year  shows  that 
the  general  average  of  prices  has  fallen  one  per 
cent,  which  means  that  ninety-nine  cents  have  the 
same  purchasing  power  as  one  dollar  in  the  preced- 
ing year.  To  use  this  method  properly  one  must 
employ  a  large  number  of  commodities  and  the  price 
of  each  should  in  the  final  result  be  given  impor- 
tance in  proportion  to  the  amounts  marketed  and 
consumed. 

144.  Meaning  of  Balance  of  Trade, —  Balance 
of  trade  is  a  term  used  to  designate  the  relation  be- 
tween imports  and  exports.  The  mercantilists  of 
the  sixteenth,  seventeenth,  and  eighteenth  centuries, 

224 


COMMERCIAL    STATISTICS 

with  their  mistaken  ideas  regarding  the  value  and 
functions  of  money,  sought  by  legislation  to  create 
an  excess  value  of  exports  over  imports  in  order 
that  the  difference,  which  was  called  a  favorable 
balance  of  trade,  might  be  paid  in  money.  Similar- 
ly an  excess  value  of  imports  over  exports,  which 
necessitated  the  exportation  of  money  to  pay  the 
difference  was  called  an  unfavorable  balance  of 
trade.  While  we  still  use  these  terms  in  the  same 
sense  as  the  mercantilists  did  and  there  is  still  more 
or  less  of  a  popular  idea  that  an  excess  value  of  ex- 
ports over  imports  is  a  good  thing  in  itself,  it  has 
been  demonstrated  again  and  again  that  one  may 
draw  no  general  conclusion  regarding  a  nation's 
prosperity  from  the  excess  value  of  its  imports  or 
exports.  Two  illustrations  will  suffice  to  make  this 
clear.  The  value  of  the  exports  of  the  United 
States  in  recent  years  has  annually  exceeded  the 
value  of  its  imports  by  over  $500,000,000  while  for 
the  same  period  the  value  of  the  imports  of  gold  and 
silver  into  this  country  has  only  exceeded  the  value 
of  the  exports  by  about  $10,000,000.  Similarly  the 
annual  excess  value  of  British  imports  over  exports 
is  about  a  billion  and  a  quarter  dollars  and  at  the 
same  time  she  is  actually  importing  more  gold  and 
silver  bullion  than  she  is  exporting.  A  practical 
explanation  of  these  phenomena  will  be  found  in  a 
more  careful  study  of  the  invisible  as  well  as  the 
visible  exports  and  imports, 

145,  Visible  Exports  and  Imports. — In  enumer- 
ating the  various  factors  which  constitute  a  part  of 
the  trade  balances  the  first  place  should  be  given  to 
15  225 


COMMERCIAL    POLICIES 

material  or  visible  exports  and  imports  which  de- 
termine the  balance  of  trade  in  the  mercantilist  or 
narrow  sense.  These  usually  comprise  not  only  the 
total  values  of  all  goods  passing  the  frontier  (general 
commerce)  but  also  generally  differentiate  the  goods 
into  imports  entered  for  consumption,  for  ware- 
house or  for  the  transit  trade  and  exports  of  domes- 
tic and  foreign  merchandise.  Gold  and  silver  coin 
and  bullion  usually  constitute  a  special  class  of  ex- 
ports and  imports  and  are  separately  enumerated. 
The  accuracy  of  visible  trade  balances  depends,  of 
course,  upon  the  trustworthiness  of  commercial  sta- 
tistics and  the  reliability  of  the  latter  depends  pri- 
marily upon  the  general  purpose  of  the  customs 
law,  whether  for  protection  or  for  revenue,  the  ef- 
fectiveness of  tariff  administration  and  the  charac- 
ter of  imported  goods,  many  articles  of  great  value 
and  small  bulk  escaping  valuation  altogether. 

146.  Invisible  Exports  and  Imports. — (a)  Pay- 
ment for  transportation  charges  in  the  form  of 
freight  and  insurance  does  not  figure  directly  in 
trade  statistics  but  this  factor  is  of  great  impor- 
tance in  explaining  international  trade  balances.  It 
is  estimated,  for  example,  that  English  ship  owners 
receive  for  transporting  foreign  goods  and  passen- 
gers between  $400,000,000  and  $500,000,000  which 
sum  is  eventually  paid  for  in  goods  and  goes  to 
swell  British  import  figures.  On  the  other  hand,  it 
is  estimated  that  American  exporters  pay  foreign 
ship  owners  over  $200,000,000  for  carrying  about 
ninety-two  per  cent  of  their  exports.    This  service  is 

226 


COMMERCIAL    STATISTICS 

largely  paid  for  in  goods  which  tend  to  swell  the 
value  of  American  exports. 

(b)  The  inhabitants  of  some  of  the  more  ad- 
vanced countries,  particularly  those  of  Western 
Europe,  often  make  investments  or  loans  in  foreign 
countries,  especially  in  the  newer  countries  having 
large  resources  and  stable  political  and  industrial 
conditions.  The  profit  on  such  investments  or  the 
interest  on  such  loans  is  paid  for  in  commodities 
which  tend  to  increase  the  visible  exports  of  the 
borrowing  and  the  imports  of  the  loaning  nations. 
It  is  estimated  that  England's  investments  and  loans 
in  foreign  countries  and  in  her  colonies  bring  her 
about  $400,000,000  annually,  while  the  United  States, 
on  the  other  hand,  owes  foreign  investors  over 
$3,000,000,000  representing  an  annual  charge  of  at 
least  $120,000,000  which  is  largely  paid  for  by  the 
exportation  of  commodities. 

(c)  A  country  may  act  in  the  capacity  of  broker 
or  commission  agent  for  other  countries  or  serve  as 
a  general  entrepot.  England  is  an  example  par 
excellence  in  these  respects.  The  international 
banking  business  of  the  world  is  carried  on  to  a 
large  extent  through  the  London  banks  which  act  as 
the  world's  great  clearing  house  in  matters  of  inter- 
national trade.  England  also  serves  as  a  general 
entrepot  where  goods  from  her  colonies  and  other 
parts  of  the  world  are  collected  for  further  distri- 
bution. For  these  various  services  England  de- 
rives a  large  income  which  is  paid  for  in  part  by 
imported  commodities. 

(d)  Again  remittances  are  sent  to  persons  liv- 

227 


COMMERCIAL    POLICIES 

ing  or  traveling  abroad  and  also  by  immigrants  to 
their  native  countries  which  amounts  in  the  aggre- 
gate to  a  large  sum.  Tourists  spend  at  least  $40,- 
000,000  annually  in  Switzerland,  over  three  times 
that  amount  in  France  and  large  sums  in  Italy,  Nor- 
way and  other  countries.  It  is  estimated  that 
Americans  spend  annually  at  least  $50,000,000  in 
foreign  travel  and  millions  of  dollars  are  sent  every 
year  to  foreign  countries  by  immigrants  in  the 
United  States. 

147.  How  Balances  are  Adjusted. —  Foreign 
bills  of  exchange  are  orders  for  the  payment  of 
money  in  foreign  countries.  Merchants  selling 
goods  abroad  draw  bills  of  exchange  upon  their  for- 
eign customers  and  sell  these  bills  to  exchange  brok- 
ers or  bankers  who  make  a  business  of  dealing  in 
foreign  exchanges  and  maintain  branch  offices  in 
several  countries.  These  bills  are  bought  and  sold 
like  any  other  article  of  international  trade  the  rate 
of  exchange  varying  with  the  relative  value  of  im- 
ports and  exports.  If  the  importation  and  exporta- 
tion of  goods  between  two  countries  are  of  equal 
value  for  a  given  period  exchanges  are  said  to  be 
at  par,  as  one  balances  the  other.  If  the  value  of 
goods  imported  exceeds  the  value  of  those  exported 
there  will  be  an  increased  demand  for  foreign  bills 
of  exchange  to  pay  for  the  balance  owed  to  foreign- 
ers. The  rate  of  exchange  will  rise  but  not  above 
the  point  at  which  it  would  be  more  profitable  to 
ship  gold  abroad.  Inversely,  if  the  value  of  goods 
exported  is  greater  than  the  value  of  goods  imported 
the  rate  of  exchange  will  show  a  tendency  to  fall. 

228 


COMMERCIAL     STATISTICS 

In  the  former  case  exchange  is  said  to  be  above  and 
in  the  latter  case,  below  par.  The  subject  of  for- 
eign exchange  is  a  complicated  one,  involving  not 
merely  the  value  of  exports  and  imports  but  other 
factors,  such  as  foreign  investments,  charges  for 
freight,  insurance,  banking  facilities,  etc.  It  is  not 
a  question  between  two  countries.  Excess  of 
exports  in  one  country  is  cancelled  by  excess  of  im- 
ports in  another  and  in  the  various  transactions 
London  figures  as  the  great  clearing  house  of  the 
world. 

BIBLIOGRAPHY 
COMMERCIAL   STATISTICS 

B.  Note.  Official  statistics  are  published  periodically, 
generally  annually  and  often  monthly  or  quarterly,  by  all 
civilized  governments.  There  are  also  valuable  private 
statistical  publications  in  the  form  of  year  books,  almanacs 
and  the  like.  For  lists  of  statistical  references  of  different 
countries  consult  the  **Statesmen's  Yearbook.  Annual 
Statement  of  the  Trade  of  the  United  Kingdom  with  For- 
eign Countries  an'l  British  Possessions;  Censuses  and 
Abstracts  of  various  countries  (especially  XII.  U.  S.  Cen- 
sus and  Abstract  of  XII.  Census  of  U.  S.)  ;  Com.  and  Nav. 
of  U.  S.  (annual);  Mon.  Sum.  Com.  and  Fin.  of  U.  S. ; 
Statistical  Abstracts  of  various  countries  (especially  the 
Statis.  Abs.  of  U.  S.  and  the  following  i  ub.  by  the  British 
Government:  (i)  Statis.  Abs.  for  United  Kingdom,  (2) 
Statis.  Abs.  for  Brit.  Empire,  (3)  Statis.  Abs.  for  the 
Colonies  and  (4)    Statis.  Abs.  for  Foreign  Countries.) 

C.  Diet  and  encyc.  (Art.  "Statistics"  in  English  diction- 
aries and  encyclopaedias.  Art.  "Handelstatistik"  in  Con- 
rad's Handworterb.  der  Staatsw.  and  in  Elster's  Worterb. 
der  Volksw. ;  consult  especially  Mulhall's  Diet,  of  Statistics 
and  various  yearbooks,  in  particular  the  Statesmen's  Year- 

229 


COMMERCIAL     POLICIES 

book)  ;  Economics,  Standard  Texts  on  (especially  Bullock 
and  Seager)  ;  Poole's  Index. 

D.  Cohn's  Handels.,  pp.  524-546;  Giffen's  Essays  in 
Finance,  1886,  Ch.  VIII.;  Grunzel  Handelsp.,  pp.  564-576; 
Lippert's  Vergleichbarkeit. ;  Walker's  "Discussions"  and 
"Money,  Trade   and    Industry"    (index). 

E.  Dewey,  D.  R.,  Study  of  Statistics,  Am.  Econ.  Assoc. 
Pub.,  1889;  Mayo-Smith,  R.,  Statistics  and  Economics, 
Am.  Econ.  Assoc.  Pub.,  1888;  Wright,  C.  D.,  Statisti'-s, 
Pop.  Sci.  Mo.,  Je.  '02. 

BALANCE  OF  TRADE  AND  FOREIGN  EXCHANGE 

C.  Diet,  and  encyc.  (especially  "Handelsbilanz"  in 
Conrad's  Handworterb,  der  Staatsw.)  ;  Economics,  Stand- 
ard Texts  on  (especially  Bullock,  Ch.  XII.,  Fawcett's 
Manual,  Ch.  IX.,  Fetter,  Ch.  L.,  Gide.  Ch.  IV.,  Jevons, 
Ch.  IV.,  Nicholson,  Vol.  II.,  Ch.  XXVI.-XXVIIL,  Pier- 
son,  Pt.  II.,  Ch.  III.,  Seager,  Ch.  XX.  and  Walker,  Pt. 
VI.,  Ch.  XIIL)  ;  Poole's  Index. 

D.  Clare's  A.  B.  C.  of  Foreign  Exchange ;  Bastable's 
Com.  of  Nations,  Ch.  III.  and  Theory  of  Inter.  Trade, 
Ch.  IV. ;  Giffen's  Essays  on  Finance ;  Goschen's  Theory 
of  Foreign  Exchanges ;  Grunzel's  Der  Intern.  Wertsch ; 
Hatfield's  Lectures  on  Com.,  pp.  278-321 ;  Huck's  Handels- 
bilanz ;  Margraff's  Inter.  Exchange ;  Pratt's  Work  of 
Wall  St.,  Ch.  XVIII. ;  Ruland's  Handelsbilanz;  Young's 
Protection  and  Progress,  p.  39  et  seq. 

E.  Bastable,  C.  F.,  Some  Applications  of  Theory  of 
Intern.  Exch.  Q.  J.  Econ.,  IV.,  I,  1889;  Bullock,  C.  J., 
Balance  of  Trade,  N.  Am.  R.,  CLXXIIL,  in,  1901 ;  Fra- 
mingo,  G.  M.,  Prevailing  Theories  in  Europe  as  to  Influ- 
ence of  Money  in  Inter  Exchange,  Yale  R.,  VI.,  361,  1897-8. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

I.  By  the  method  of  declaration  exporters  tend  to 
undervalue  goods.  Why?  By  the  method  of  estimation 
would  manufacturers,  who  are  members  of  a  government 
expert  commission,  tend  to  undervalue  or  over-value  im- 

230 


COMMERCIAL    STATISTICS 

ported  goods  which  compete  with  home  products?    Why? 
What  effect  would  this  have  upon  the  value  of  statistics? 

2.  A  fee  of  $2.50  is  required  for  the  authentification  of 
consular  invoices.  Such  an  invoice  is  not  required  for 
imported  goods  valued  at  less  than  $100.  May  importa- 
tions be  broken  into  small  lots  in  order  to  escape  the  pay- 
ment of  the  fee?  How  does  this  exemption  affect  import 
statistics?     (Con.   Reg.  of  U,  S.,  Sec.  661). 

3.  Compare  for  a  number  of  years  the  total  value  of 
"exports  declared  for  the  United  States"  with  the  total 
value  of  imports  into  the  United  States.  Why  are  they 
not  the  same? 

4.  Our  total  foreign  commerce  was  valued  in  round 
numbers  for  1891,  1892  and  1893  at  $1,729,000,000,  $1,857,- 
000,000  and  $1,714,000,000  respectively.  Comparing  the 
years  1891  and  1892  are  we  to  conclude  that  our  foreign 
trade  is  increasing?  How  about  the  years  1892  and  1893? 
What  is  wrong  with  the  method? 

5.  What  is  the  meaning  of  the  expression  "figures  do 
not  lie,  but  liars  figure?'' 

6.  What  bureaus  or  divisions  of  the  federal  govern- 
ment are  engaged  largely  in  the  compilation  of  statistical 
matter?  (Art.  "Statistics"  in  Univ.  Cyc. ;  also  appendix 
of  the  Doc.  Catalog).  Do  any  states  of  the  American 
Union  issue  statistical  publications? 

7.  Why  are  import  valuations  apt  to  be  too  high  and 
export  valuations  too  low  in  a  country  like  England,  hav- 
ing a  large  merchant  marine  and  a  long  sea  carriage? 

8.  Does  freight  figure  more  prominently  in  raw  ma- 
terials than  in  manufactured  articles?  How  would  this 
be  likely  to  affect  values? 

9.  What  was  the  classification  of  American  imports 
and  exports  prior  to  1906?  (See  Statis.  Abs.  of  U.  S.  and 
volume  on  Com.  and  Nav.).  What  is  the  purpose  of  the 
new  classification?     (Com.  and  Nav.  of  U.  S.,  1906,  p.  15). 

10.  May  a  country  show  an  unfavorable  balance  of 
trade  for  many  months  of  a  year  but  for  the  total  of  the 
year  a  favorable  balance?     Give  an  illustration. 

231 


COMMERCIAL    POLICIES 

11.  How  may  political  events  such  as  a  war  affect  trade 
balances?     (Nicholson,  Vol.  II.,  Bk.  III.,  p.  273). 

12.  It  is  often  stated  that  the  total  value  of  exports 
must  equal  the  total  value  of  imports.  How  do  you  explain 
the  fact  that  the  total  imports  of  the  world  exceed  in  money 
value  the  total  exports?  (Nicholson,  Vol.  II.,  Bk.  III.,  p. 
275;  Giffen's  Essays  on  Finance,  2nd  series,  p.  164;  Gide, 
p.  295,  note). 

13.  Make  an  analysis  of  the  trade  balances  of  France 
(Gide,  p.  297),  Germany  (Conrad's  Handworterb,  Art. 
"Handelsbilanz"),  England  and  United  States.  (Ashley's 
Tariff  Problem;  Money's  Elem.  of  Fiscal  Problem;  Bul- 
lock's Economics.) 


232 


CHAPTER   XVII. 

NAVIGATION   POLITICS 

148.  General. —  Navigation  is  defined  as  "the 
science  or  art  of  directing  the  course  of  vessels  as 
they  sail  from  one  part  of  the  world  to  another." 
It  is  really  a  branch  of  the  more  general  subject  of 
"Transportation  and  Communication,"  and  in  its 
restricted  sense  is  an  important  instrument  of  com- 
merce. From  its  political  side  it  is  so  interwoven 
with  the  general  development  of  commerce  that 
some  writers  refer  to  it  as  a  branch  of  the  general 
subject  of  commercial  politics.  Navigation  politics 
may  be  defined  as  state  regulation  which  has  for  its 
principal  purpose  the  development  of  the  national 
shipping  interests.  These  regulations  may  affect 
primarily  domestic  or  foreign  commerce.  It  is  only, 
however,  in  so  far  as  they  affect  the  latter  that  they 
may  be  considered  a  part  of  international  com- 
mercial politics. 

Modern  navigation  politics  has  been  active  in 
three  directions :  ( i )  in  the  maintenance,  on  the 
part  of  certain  nations,  of  jurisdiction  over  certain 
portions  of  the  sea  (]\Iare  Clausum)  ;  (2)  in  the 
development  of  the  general  principle  of  "freedom 
of  navigation"  or  right  of  all  nations  to  unrestricted 
passage  over  the  high  seas;  and  (3)  in  the  national 

233 


COMMERCIAL    POLICIES 

protection  of   shipping   industries    against    foreign 
competition  (Navigation  Laws). 

149.  Mare  Clausum. —  The  conditions  of  the  an- 
cient world  rendered  the  high  seas  "open  to  all  for 
depredation,"  but  during  the  Middle  Ages  and  the 
early  part  of  modern  history  the  maritime  powers 
of  Europe  asserted  sovereignty  over  certain  por- 
tions of  the  high  seas.  England,  for  example, 
claimed  dominion  over  the  Channel,  the  North  Sea, 
the  seas  westward  from  Ireland,  the  Bay  of  Biscay 
and  the  ocean  north  of  Scotland ;  Denmark  and 
Sweden  divided  the  control  over  the  Baltic,  and 
\^enice  maintained  sovereignty  over  the  Adriatic. 
The  growth  of  commerce  after  the  discoveries, 
coupled  with  the  exorbitant  Portuguese  and  Spanish 
claims  of  sovereignty  over  nearly  all  the  high  seas, 
led  to  a  reaction  against  the  principle  of  "Mare 
Clausum"  which  found  classic  literary  expression 
in  1609  in  Grotius'  great  work.  England's  persist- 
ence in  her  claims  of  sovereignty  over  surrounding 
waters  was  the  cause  of  much  international  warfare, 
especially  with  the  Dutch.  Her  insistence  on  the 
right  of  search  was  the  nominal  cause  of  the  War 
of  181 2.  Partly  through  insensible  abandonment 
and  partly  because  it  has  been  proven  that  maritime 
occupation  must  be  effective  in  order  to  be  valid, 
the  doctrine  of  mare  clausum  has  been  curtailed  to 
the  maintenance  of  sovereignty  over  deeply  in- 
dented bays  or  other  waters  whose  natural  situation 
admits  of  national  control.  Modern  international 
law  generally  recognizes  national  sovereign  rights 
over  the  high  seas  to  a  distance  of  one  league  from 

234 


NAVIGATION    POLITICS 

shore,  but  the  practical  effect  of  this  principle  has 
been  largely  nullified  in  recent  years  by  the  in- 
creased range  of  weapons  of  war. 

150.  Freedom  of  Navigation. —  The  right  of  un- 
restricted passage  over  the  high  seas  is  now  uni- 
versally recognized.  Its  growth  has  abridged  the 
principle  of  "Alare  Clausum"  and  the  latter  tends 
to  grow  less  important  in  proportion  as  the  former 
is  emphasized.  While  the  principle  of  free  naviga- 
tion of  the  oceans  and  large  seas  was  recognized 
comparatively  early,  the  growth  of  the  principle  as 
applied  to  straits,  inland  seas  and  navigable  rivers 
was  slower.  There  has  been  much  international 
controversy  regarding  the  straits  leading  into  the 
Baltic  and  Black  Seas.  Denmark  long  claimed 
control  over  the  former,  but  these  claims  were  satis- 
fied in  1857  by  a  stipulated  payment  by  the  mari- 
time powers  of  the  world.  As  regards  the 
Black  Sea  it  was  Turkish  waters  until  Russia's 
acquisition  of  the  Northern  coast.  By  the  treaty 
of  Adrianople  (1829)  entrance  through  the 
Bosphorus  was  allowed  the  merchant  vessels 
of  Russia  and  the  Powers  friendly  to  her. 
The  Black  Sea  was  neutralized  by  the  Treaty  of 
Paris  (1856),  but  in  1871  Russia  secured  the  right 
of  maintaining  a  fleet  in  the  Black  Sea,  but  her  war- 
ships were  debarred  from  passing  the  Bosphorus. 
Where  a  navigable  river  divides  two  countries  the 
use  of  such  a  river  is  guaranteed  to  both  countries, 
and  the  boundary  line  is  held  to  run  along  the  mid- 
dle of  the  stream.  Where  navigable  rivers  rise  in 
one  territory  and  discharge  through  another  terri- 

235 


COMMERCIAL    POLICIES 

tory  international  law  does  not  admit  the  moral 
claim  sometimes  asserted  by  the  upper  state  to  navi- 
gate to  the  mouth.  Yet  most  of  such  rivers  of 
Christian  countries  have  been  opened  to  world  com- 
merce by  international  agreements.  The  United 
States  has  figured  prominendy  in  the  opening  up 
and  the  neutralization  of  the  great  rivers  and  canals 
of  the  world.  This  phase  of  her  commercial  politics 
has  already  been  amply  discussed  in  one  of  the 
chapters  on  Commercial  Treaties. 

151.  Navigation  Laws. —  The  third  way  in 
which  navigation  politics  has  been,  and  in  many 
instances  still  is,  active  is  that  of  national  protection 
of  shipping  industries  against  foreign  shipping  by 
means  of  so-called  navigation  laws.  Such  regula- 
tions and  restrictions  were  characteristic  of  the  period 
following  the  great  discoveries  and  may  be  regarded 
as  one  phase  of  the  application  of  the  principles 
of  mercantilism.  These  laws  have  to  do  largely 
wuth  such  matters  as  defining  the  nationality  of 
vessels,  the  manner  of  their  registration,  and  in  gen- 
eral the  privileges  wdiich  domestic  vessels  may  lay 
claim  to  as  well  as  the  conditions  controlling  the 
participation  of  foreign  ships  in  the  national  trade. 
In  efforts  to  secure  for  domestic  shipping  advan- 
tages over  foreign  shipping  two  general  policies 
have  been  employed — the  policy  of  exclusion  and 
the  policy  of  discrmiination.  By  the  former  plan 
particular  branches  or  lines  of  navigation  or  partic- 
ular classes  of  merchandise  are  reserved  exclusively 
for  domestic  ships.  This  policy  was  first  developed 
in  the  Italian  city  republics  and  m  the  Hanseatic 

236 


NAVIGATION     POLITICS 

League  and  was  the  characteristic  feature  of  the 
EngHsh  navigation  policy  down  to  the  middle  of 
the  nineteenth  century.  By  the  policy  of  discrim- 
ination foreign  ships  are  allowed  to  participate  in 
the  trade  of  a  country,  but  they  are  subjected  to 
tonnage  dues  and  customs  duties  are  levied  on  their 
cargoes — burdens  from  which  domestic  ships  and 
their  cargoes  are  wholly  or  partially  exempt.  This 
was  the  characteristic  feature  of  the  early  American 
and  Prussian  navigation  policy,  while  the  German 
Imperial  policy  as  regards  navigation  is  essentially 
one  of  free  trade  with  the  exception  of  its  coasting 
trade  The  French  policy  has  been  varied.  Dur- 
ing the  Revolutionary  period  (1793-1816)  it  was 
essentially  a  policy  of  exclusion,  but  before  1793 
and  after  1816  it  has  been  one  essentially  of  dis- 
crimination with  exclusion  as  a  supplementary 
policy. 

152.  English  Navigation  Policy. —  While  the 
first  English  navigation  act  dates  from  the  time  of 
Richard  II.  (1381),  English  navigation  politics  did 
not  become  important  until  the  middle  of  the  seven- 
teenth century,  when  England  had  become  a  great 
colonial  power  and  was  attempting  to  capture  the 
domestic  and  foreign  carrying  trade  from  other 
nations,  especially  from  Holland,  which  at  that  time 
was  the  greatest  maritime  nation  of  Europe.  The 
most  important  English  legislation  along  navigation 
lines  were  the  laws  of  165 1,  1660  ("First  Naviga- 
tion Act")  and  1663  ("Second  Navigation  Act"). 
The  chief  provisions  of  these  laws  were  the  follow- 
ing:   (i)    the  restriction   of  the  coasting  trade  to 


COMMERCIAL    POLICIES 

English  vessels,  such  a  law  having  been  enacted  in 
1563  and  remaining  in  force  until  1854;  (2)  dis- 
criminating (double)  duties  on  the  products  of 
foreign  fisheries;  (3)  prohibition  against  foreigners 
becoming  merchants  or  factors  in  the  Plantations; 
(4)  the  restriction  of  the  foreign  commerce  of  the 
colonies  to  national  ships  with  English  commanders 
and  with  crews  three-fourths  of  which  must  be 
English;  (5)  importations  from  European  countries 
for  certain  "enumerated  goods"  being  confined  to 
English  ships  or  to  ships  owned  where  the  goods 
were  produced  or  forwarded;  (6)  likewise  goods 
of  the  growth,  production  or  manufacture  of  Africa, 
Asia  or  America  not  being  permitted  to  be  imported 
into  England  at  all  except  in  English  vessels  having 
officers  and  a  majority  of  the  crew  English.  The 
attempt  to  enforce  these  regulations  was  one  of  the 
main  causes  of  several  European  wars.  Although 
modified  from  time  to  time  they  remained  in  force 
substantially  unchanged  for  nearly  two  centuries, 
being  greatly  altered  in  1825  and  for  the  most  part 
repealed  in  1849. 

153.  Navigation  Policy  of  the  United  States. — 
The  navigation  policy  of  the  United  States  has  been 
considered  in  more  or  less  detail  in  different  parts 
of  the  present  volume  dealing  with  the  subjects  of 
reciprocity,  the  policy  of  protection  and  that  of  dif- 
ferential duties.  Brief  repetitions  may  not,  how- 
ever, be  out  of  place  in  the  present  connection. 
The  beginnings  of  the  American  navigation  policy, 
as  expressed  in  the  early  treaties  of  commerce  and 
navigation,  were  on  the  basis  of  "the  most  perfect 

238 


NAVIGATION    POLITICS 

equality  and  reciprocity,"  but  after  a  critical  period 
of  several  years  following  the  recognition  of  Ameri- 
can independence,  during  which  the  new  nation 
suffered  not  only  from  interstate  discriminations, 
but  also  from  the  exclusion  navigation  policy  of 
Great  Britain,  the  Constitution  was  adopted  which 
gave  the  federal  government  ample  power  in  mat- 
ters of  commerce  and  navigation.  The  United 
States  embarked  at  once  upon  a  severely  discrim- 
inating navigation  policy.  The  law  of  1789  placed 
a  tonnage  duty  of  six  cents  per  ton  on  vessels  built, 
owned  and  manned  by  Americans,  while  vessels 
built  in  the  United  States,  but  owned  and  manned 
by  foreigners,  paid  a  duty  of  thirty  cents  per  ton 
which  was  raised  to  fifty  cents  per  ton  in  the  case 
of  vessels  built  abroad  and  owned  and  manned  by 
foreigners.  Ten  per  cent,  reduction  was  allowed 
from  the  regular  tariff  duties  if  goods  were  im- 
ported in  American  vessels.  This  law  was  changed 
in  1794  to  an  extra  duty  of  ten  per  cent,  on  im- 
portations in  foreign  vessels.  As  to  the  coasting 
trade  the  law  of  1789  provided  that  American  ves- 
sels should  pay  the  tonnage  tax  only  once  a  year, 
while  foreign  vessels  should  pay  it  upon  every  en- 
trance in  an  American  port.  This  virtual  exclusion 
of  foreign  vessels  from  American  coastwise  trade 
was  replaced,  a  few  years  later,  by  an  absolute  ex- 
clusion. 

The  registry  law  of  1789  provided  that  only  ves- 
sels built  in  the  United  States,  belonging  to  Ameri- 
can citizens  and  having  an  American  master,  should 

239 


COMMERCIAL    POLICIES 

be  deemed  ships  of  the  United  States  and  entitled 
to  the  benefits  of  American  navigation  laws. 

These  various  laws  formed  the  foundation  of  the 
navigation  policy  of  the  United  States.  During  the 
early  part  of  the  nineteenth  century  the  American 
government  placed  more  and  more  restrictions  on 
foreign  vessels  and  their  cargoes,  owing  largely  to 
the  hostile  legislation  enacted  by  certain  European 
countries,  especially  by  England.  As  has  been 
stated,  the  first  modification  came  about  1815  in 
the  way  of  reciprocity  for  direct  trade,  and  about 
ten  years  later  reciprocity  was  extended  to  indirect 
trade  with  certain  countries.  From  1830  to  i860  a 
more  liberal  policy  was  pursued,  but  about  tlie  latter 
date  the  change  from  wooden  sailing  vessels  to  iron 
steamships,  the  depression  in  freight  rates  and  more 
lucrative  opportunity  of  investing  American  capital 
in  other  directions  caused  a  rapid  decline  in  Ameri- 
can shipping  interests.  The  movement  was  also 
accentuated  by  the  Civil  War  with  the  attendant 
depredations  on  American  commerce.  Non-dis- 
criminating tonnage  duties  were  reenacted  during 
the  war,  but  were  considerably  modified  by  the 
laws  of  1884  and  1886  already  referred  to.  Va- 
rious measures  have  been  proposed  or  adopted  since 
the  Civil  War  for  the  purpose  of  resuscitating  the 
American  merchant  marine.  A  discussion  of  these 
measures  brings  us  to  a  consideration  of  the  general 
subject  of  steamship  subsidies. 

154.  Character  of  Shipping  Subsidies. — A  ship- 
ping subsidy,  bounty  or  subvention  is  a  pecuniary, 
governmental  aid  to   shipping.     It  may  be  in  the 

240 


NAVIGATION    POLITICS 

form  of  a  construction  premium,  so  much  being 
paid  for  sailing  and  so  much  for  steam  vessels 
per  ton ;  it  may  be  an  equipment  premium  such  as 
the  free  importation  of  ship-building  material ;  it 
may  be  a  so-called  navigation  premium  or  payment 
for  voyages  of  a  certain  kind  or  for  certain  pur- 
poses ;  or  it  may  be  in  the  form  of  liberal  payments 
for  certain  services  rendered,  such  as  that  of  carry- 
ing the  mail.  These  premiums  are  sometimes  in 
the  form  of  a  lump  sum  and  sometimes  they  consist 
of  annual,  monthly,  or  other  periodic  payments. 
Sometimes  also  payments  are  made  per  trip  or  per 
ton  mile.  A  government  granting  subsidies  usually 
requires  the  rendering  of  certain  services  in  return : 
(i)  regular  voyages,  generally  monthly,  bi-monthly 
or  a  certain  number  per  annum;  (2)  a  minimum 
speed  of  vessels,  usually  stipulating  for  a  certain 
number  of  miles  per  hour;  (3)  certain  requirements 
in  the  way  of  the  construction  and  equipment  of 
vessels ;  (4)  the  use,  whenever  possible,  of  domestic 
materials  in  building  vessels;  and  (5)  the  right  of 
appropriation  in  times  of  war  upon  remunerating 
vessel  owners. 

155,  History  of  Foreign  Shipping  Subsidies. — 
Bounties  were  paid  as  early  as  1730  on  English 
vessels  engaged  in  the  fisheries,  the  avowed  purpose 
being  primarily  political — the  training  of  mariners 
for  the  British  navy.  These  bounties  were  modified 
from  time  to  time  and  finally  repealed  in  1867.  To- 
ward the  middle  of  the  nineteenth  century  the 
growth  of  English  foreign  trade  and  the  political 
as  well  as  economic  necessity  of  better  means  of 
16  241 


COMMERCIAL    POLICIES 

transportation  and  communication  between  England 
and  foreign  countries,  including  also  her  widely 
scattered  colonial  possessions,  caused  the  British 
government  to  give  pecuniary  aid  for  the  develop- 
ment of  her  steamship  service.  The  subsidy  policy 
was  inaugurated  in  1839  by  a  contract  with  Samuel 
Cunard  for  a  fortnightly  service  between  England 
and  Halifax.  England  has  continued  this  policy 
to  the  present  date.  Sometimes  these  payments 
have  been  fixed  or  lump  sums  and  at  other  times  a 
sum  graded  by  the  amount  of  mail  carried.  The 
latter  is  in  the  nature  of  a  subsidy,  because  such 
amounts  are  largely  in  excess  of  international  postal 
rates.  At  the  present  time  the  English  subsidies 
amount  approximately  to  £1,000,000  and  are  for 
the  most  part  fixed  yearly  payments  to  certain  lines 
for  the  carrying  of  mail.  Germany  pays  about 
10,000,000  marks  annually  for  mail  service  to  East- 
ern Asia,  Australia,  East  Africa  and  America.  In 
addition  to  this,  indirect  bounties  are  paid  in  the 
form  of  customs  exemptions  on  ship-building  ma- 
terial, as  well  as  preferential  railway  rates  on  such 
material  and  on  many  articles  exported  in  German 
ships.  France  pays  to  her  shipping  interests  about 
50,000,000  francs  annually,  largely  in  the  form  of 
postal  subsidies  and  bounties  on  navigation  and 
construction,  but  there  is  no  claim,  as  is  the  case 
with  German  subsidies,  that  the  services  rendered 
are  proportional  to  the  amounts  paid  by  the  gov- 
ernment. 

156.  Early  American  Shipping  Subsidy  Policy. 
— ^The  United  States   began  the   policy  of  paying 

242 


NAVIGATION    POLITICS 

subsidies  in  1845  t)y  an  act  authorizing  the  Post- 
master-General to  make  contracts  for  carrying  for- 
eign mails  in  American  ships.  A  line  to  Bremen 
was  established  by  virtue  of  this  act  two  years  later. 
The  act  of  1847  required  the  Secretary  of  the  Navy 
to  arrange  for  American  ships  to  carry  mail  from 
New  York  to  Liverpool,  the  West  Indies,  and  Gulf 
ports  and  from  Panama  up  the  Pacific  coast.  From 
these  contracts  there  arose  the  Collins  line,  the 
Pacific  Mail  Steamship  Company  and  some  minor 
lines.  In  1852  the  Collins  subsidy  .was  increased 
from  $385,000  to  $858,000  per  annum.  The  gov- 
ernmental requirement  was  generally  for  a  certain 
number  of  trips  per  year.  Competition  between  the 
Collins  and  Cunard  lines  was  severe  and  caused  a 
lowering  of  rates.  In  the  struggle  the  Collins  line 
at  first  more  than  held  its  own,  but  the  loss  of  its 
best  steamers,  the  Arctic  (1854)  and  Pacific  (1856), 
coupled  with  a  reduction  of  the  government  subsidy 
to  $385,000  in  1856,  and  the  total  abolition  of  all 
contracts  for  carrying  mail  two  years  later, 
caused  the  failure  of  this  important  American  line. 
At  the  outbreak  of  the  Civil  War  all  American  lines 
to  Europe  were  withdrawn.  The  government  paid 
no  further  subsidies  until  1866  when  $250,000  was 
given  annually  for  a  line  between  New  York  and 
Rio  Janeiro,  and  in  the  following  year  $500,000  per 
year  was  voted  to  the  Pacific  Mail  Steamship  Com- 
pany for  a  monthly  service  to  Japan  and  China  via 
Hawaii.  In  1873  a  bill  authorizing  the  payment  of 
an  additional  $500,000  to  the  Pacific  Mail  Steam- 
ship Company  for  double  service  passed  Congress, 
243 


COMMERCIAL    POLICIES 

but  the  company  never  received  this  sum  owing  to 
the  disclosure  of  the  fact  that  it  had  used  money  to 
influence  legislation  and  because  it  failed  to  comply 
with  all  imposed  conditions.  In  1875  the  Brazilian 
and  Pacific  mail  subsidy  contracts  expired  and  were 
not  renewed.  Although  in  1879  an  effort  was  again 
made  to  secure  subsidies  for  the  Brazilian  line,  it 
was  not  until  1891  that  further  subsidy  measures 
succeeded  in  passing  Congress.  The  Collins  line 
had  cost  the  American  government  $15,000,000  and 
the  Pacific  Mail  Steamship  Company  $4,500,000, 
and  the  United  States  had  little  or  nothing  to  show 
for  the  expenditure  of  this  large  sum  of  money. 

157.  Postal  Subsidy  Act  of  1891. — By  the  act  of 
1891  mail  subsidies  on  a  mileage  basis  were  to  be 
paid  as  follows:  For  first-class  steamers  (iron  or 
steel  screw  steamships  of  at  least  8,000  tons  registry 
and  capable  of  maintaining  a  speed  of  twenty  knots 
an  hour),  $4  per  mile;  second-class  steamers  (iron 
or  steel  steamships  of  at  least  5,000  tons  burden  and 
capable  of  maintaining  a  speed  of  at  least  sixteen 
knots  an  hour),  $2  per  mile;  third-class  steamers 
(iron  or  steel  steamships  of  at  least  2,500  tons  and 
capable  of  maintaining  a.  speed  of  fourteen  knots 
an  hour),  $1  per  mile;  and  fourth-class  steamers 
(iron,  steel  or  wooden  steamships  of  at  least  1,500 
tons  and  a  minimum  of  twelve  knots  per  hour), 
66  2-;^  cents  per  mile.  Besides  these  subsidies 
American  vessels  are  paid  $1.60  a  pound  for  carry- 
ing first-class  mail  matter  and  8  cents  a  pound  for 
second-class  matter,  while  foreign  vessels  are  only 
paid  the  international  postal  rates  of  44  cents  and 

244 


NAVIGATION    POLITICS 

43^  cents  per  pound  respectively.  None  but  ships 
of  the  first  class  were  eligible  to  carry  mails  between 
the  United  States  and  Great  Britain,  and  such  ships 
were  forthcoming  only  after  the  changing  of  the 
registry  laws  of  the  United  States  in  1892  whereby 
two  foreign  built  vessels,  the  City  of  Paris  and  the 
City  of  New  York,  owned  by  the  International 
Navigation  Company,  largely  an  American  concern, 
were  admitted  to  American  registry  upon  the  agree- 
ment of  the  company  to  have  two  similar  ships 
built  in  American  ship  yards.  Ocean  mail  contracts 
for  ships  of  the  second,  third,  and  fourth  classes 
were  made  with  several  lines  running  to  Central 
and  South  American  ports  and  to  Eastern  Asia, 
but  in  all  cases  such  contracts  were  formed  with 
lines  already  existing.  However,  this  legislation 
was,  according  to  Marvin,  of  unquestionable  value 
in  improving  the  character  of  the  American  fleet. 
Since  1891  almost  every  session  of  Congress  has 
witnessed  the  introduction  of  bills  having  for  their 
main  purpose  the  resuscitation  of  the  American 
merchant  marine.  Conspicuous  among  these  meas- 
ures are  proposals  for  the  payment  of  various  kinds 
of  cargo  and  mail  subsidies,  and  although  those 
interested  in  aiding  the  shipping  interests  of  the 
country  have  had  powerful  influences  to  push  their 
claims,  the  unpopularity  of  these  measures,  espec- 
ially in  the  South  and  Middle  West,  has  prevented 
the  passage  of  any  efifective  remedial  legislation. 
Profssor  Garner  in  commenting  on  the  situation  in 
a  recent  number  of  the  North  American  Reviezv 
says:      "The    decline  of   the    American    merchant 

245 


COMMERCIAL    POLICIES 

marine  from  a  position  of  maritime  supremacy 
to  a  position  of  comparative  insignificance  is  one 
of  the  commonplaces  of  American  economic  his- 
tory. It  is  encouraging  to  note  that  at  no  time 
since  the  disappearance  of  the  flag  from  the  high 
seas,  however,  has  there  been  more  general  de- 
mand for  the  revival  of  the  merchant  marine 
than  at  present.  At  the  last  session  of  Con- 
gress no  less  than  three  measures  were  enacted  in 
the  interest  of  American  shipping.  One  of  these 
requires  all  supplies  for  the  use  of  the  army  and 
navy  to  be  carried  in  American  vessels;  another 
extends  the  application  of  the  coasting-trade  laws 
to  all  trade  between  the  United  States  and  the 
Philippines ;  the  third  created  a  commission  to  con- 
sider and  recommend  legislation  for  the  develop- 
ment of  the  merchant  marine  and  the  amelioration 
of  the  condition  of  those  engaged  in  seafaring 
trades."  This  Merchant  Marine  Commission, 
sometimes  referred  to  as  the  Gallinger  Commission 
from  the  name  of  the  chairman,  after  due  consid- 
eration of  the  subject,  made  its  report  to  Congress 
on  January  5,  1905.  The  majority  favored  an 
operating  subvention  of  $5  per  ton  annually,  a  fur- 
ther extension  of  the  postal  subsidy  law  of  1891 
and  a  tonnage  tax  on  foreign  vessels  entering 
American  ports,  while  the  minority  recommended 
discriminating  import  duties  and  a  reduction  of  the 
tariff  on  imported  ship-building  materials.  As  al- 
ready stated  no  legislation  embodying  part  or  all 
of  these  recommendations  has  succeeded  in  passing 
Congress. 

246 


NAVIGATION    POLITICS 

158.  Arguments  for  and  Against  Navigation 
Laws. —  As  regards  the  general  subject  of  naviga- 
tion politics  it  may  be  said  that  the  arguments  for 
or  against  navigation  laws  are  much  the  same  as 
those  used  by  advocates  and  opponents  of  the  gen- 
eral policy  of  protection.  As  a  general  principle 
of  economics,  if  we  can  justify  protection  to  manu- 
factures and  agriculture,  we  certainly  cannot  deny 
the  right  of  navigation  to  an  equal  consideration. 
It  is  not,  however,  a  theory  or  a  principle  so  much 
as  it  is  a  condition  which  confronts  one.  As  re- 
gards the  practicality  of  navigation  laws  no  uni- 
versal rule  can  apply.  The  question  here  is — and 
it  is  the  same  for  all  kinds  of  protective  measures — 
whether,  all  things  considered,  navigation  protec- 
tion conduces  to  the  permanent  maintenance  and 
development  of  the  efficiency  of  the  national  ship- 
ping. As  an  economic  question  in  the  United  States 
it  is  argued  that  a  merchant  marine  is  extremely 
desirable  mainly  for  two  reasons — firstly,  because 
it  would  mean  an  annual  saving  of  about  $200,- 
000,000  now  paid  in  the  form  of  freights  to  foreign 
ship  owners  and,  secondly,  because  the  rehabilita- 
tion of  the  merchant  marine  would  cause  an  ex- 
tension of  American  commerce  on  the  ground  that 
"trade  follows  the  flag."  For  both  of  these  reasons 
it  is  argued  that  there  would  be  "an  enlargement  of 
the  opportunities  for  American  capital  and  labor." 

In  reply  to  these  arguments  it  is  asserted — and 
this  is  not  denied — that  foreigners  carry  American 
products  because  they  can  both  construct  and 
operate    ships    cheaper   than   can   be   done   in    the 

247 


COMMERCIAL    POLICIES 

United  States,  and  for  these  reasons  they  can  afford 
to  carry  American  products  at  rates  that  would  be 
unremunerative  to  American  capital  and  labor. 
Stated  in  a  little  different  way,  it  is  asserted  that 
Americans  do  not  build  and  operate  their  ships 
because  the  opportunities  of  investment  are  so  much 
more  favorable  in  other  lines. 

The  political  arguments  in  favor  of  a  merchant 
marine  for  a  country  like  the  United  States  are  two- 
fold. In  the  first  place,  the  merchant  marine  serves 
as  a  school  for  sailors,  and  sailors  are  necessary  for 
a  proper  personal  equipment  for  the  navy,  and  in 
the  second  place  the  efficiency  of  the  navy  is  much 
weakened  without  the  use  of  merchant  ships  as 
colliers,  scouts,  transports,  despatch  boats  and  the 
like.  One  may  well  question  the  validity  of  the 
economic  arguments  for  navigation  laws  as  applied 
to  the  United  States,  but  the  political  arguments  are 
not  so  easily  answered. 

BIBLIOGRAPHY 

A.  Consult  Diet,  and  encyc.  of  Ch.  I.  (especially 
"Navigation  Laws"  and  "Shipping  Subsidies"  in  Lalor, 
Cyc,  Palg.  Diet.,  and  New  Inter.  Encyc. ;  "Schiffahrts- 
politik"  in  Conrad's  Handw.  der  Staatsw.  and  Elster 
Worterb  der  Volksw.)  ;  Eng.  Indus.  Histories  (Ch.  I.)  ; 
much  valuable  information  may  also  be  found  in  general 
histories  of  England  and  the  United  States;  Poole's  Index. 

B.  *Cong.  Record  (index)  ;  *Con.  Rep.  of  United 
States  (special  report  on  Merchant  Marines  of  Foreign 
Countries);  *GalHnger  Report,  Wash.  Gov.  Printing,  1905; 
Mercantile  Marine  Subsidies,  List  of  Books  on,  Cong. 
Library;  **Navigation  Laws  of  United  States,  U.  S.  Gov. 
Print,  of. 

248 


NAVIGATION    POLITICS 

D.  Abbot's  Amer.  Merchant  Ships  and  Sailors ;  Bates* 
Amer.  Navigation;  Bates'  Amer.  Merchant  Marine; 
Blackmore's  Brit.  Mercantile  Marine ;  Van  der  Borght, 
Handel,  u.  Handels,  pp.  468-476;  E.  R.  Johnson's  Ocean 
and  Inland  Trans.;  Lindsay's  Hist,  of  Merchant  Shipping; 
*Marvin's  Am.  Merchant  Marine;  Well's  Our  Merchant 
Marine. 

E.  Frye,  W.  R.,  Meaning  and  Necessity  of  Ship-Sub- 
sidies, Indep.,  21,  Je.  '06;  Garner,  J.  W.,  Merchant  Marine 
Investigation,  N.  Am.  R.,  Mr.  '05 ;  Hadley,  A.  T.,  Policy 
of  Ship  Subsidies,  R.  of  Rs.,  XXL,  325;  Hanna,  M.  A., 
A  National  Problem,  Indep.,  LIIL,  10;  McVey,  F.  L.,  Sub- 
sidizing Merchant  Marines,  Pol.  Sci.  Q.,  Je.  '06;  Meeker, 
R.,  Shipping  Subsidies,  Pol.  Sc.  Q.,  D.  '05;  Root,  J.  W,, 
British  Ship  Subsidies,  Atlan.,  LXXX.,  387. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  Discuss  in  detail  the  effects  on  American  shipping 
interests  and  commercial  policy  were  the  United  States 
to  resort  to  discriminating  tonnage  duties  (Congressional 
Record  for  1905,  1906  and  1907). 

2.  Give  examples  to  show  that  a  nation  of  sailors  wins 
in  naval  warfare. 

3.  Was  Adam  Smith  opposed  to  the  general  principles 
of  mercantilism?  Are  navigation  laws  one  application  of 
these  principles?  What  was  Smith's  position  regarding 
the  English  navigation  acts?  Cite  the  views  of  other 
English  economists  on  this  point. 

4.  Give  other  examples  than  those  mentioned  in  the 
text  of  national  claims  over  high  seas. 

5.  English  coasting  trade  is  open  to  all  vessels  both 
domestic  and  foreign.  Do  many  foreign  vessels  engage 
in  this  trade  in  England? 

6.  Chief  provisions  of  the  English  and  American  laws 
regarding  the  registry  of  ships?  ("Shipping  Law"  in 
Univ.  Cyc). 

7.  What  change  in  American  ship  registration  was 
advocated  by  Ex-President  Cleveland?     What  effect  would 

249 


COMMERCIAL    POLICIES 

the  adoption  of  his  view  have  upon  American  shipbuilders? 
Upon  American  ship  owners?     (Mess,  of  Pres.) 

8.  Are  there  any  evidences  that  Americans  own  ves- 
sels which  are  built  abroad  and  fly  the  flag  of  a  foreign 
country?  Could  our  law  be  changed  to  remedy  such  a 
situation? 

g.  How  does  the  German  regulation  regarding  coast- 
wise navigation  differ  from  the  English  and  American 
law?     (Elster's  Worterb  der  Volksw.,  II.,  pp.  470-471). 

10.  If  a  large  part  of  American  exports  and  imports 
were  carried  in  American  bottoms  would  there  be  any 
guarantee  that  ocean  rates  would  be  lower  than  under 
existing  conditions? 

11.  Were  the  United  States  navigation  laws  of  1789 
the  result  of  a  compromise?  (Well's  Our  Merchant 
Marine;  also  his  article  on  Navigation  Laws  in  Lalor's 
Cyc). 

12.  Who  was  Hugo  Grotius?  What  did  he  write? 
In  what  language?  What  has  been  the  influence  of  his 
work?     (Any  Encyc). 

14.  Construct  a  diagram  showing  the  decline  in  the 
United  States  merchant  marine  during  the  past  sixty  or 
seventy  years.     (Statis.  Abs.  of  U,  S.). 


250 


CHAPTER  XVIII. 

PUBLIC   NAVIGATION-PROMOTING 
INSTITUTIONS 

159.  General. — In  a  previous  chapter  reference 
has  been  made  to  certain  public  trade-promoting  in- 
stitutions which  are  to  be  found  with  variations  to 
meet  local  conditions,  in  the  national  administration 
of  all  civilized  governments.  Likewise  there  are 
certain  administrative  and  executive  offices  in  mod- 
ern states  which  have  for  their  primary  purpose  the 
regulation  and  development  of  shipping  interests. 
In  the  United  States  most  of  these  offices  or  insti- 
tutions are  either  a  part  of  the  Department  of  Com- 
merce and  Labor  or  of  the  Treasury  Department. 
Under  the  former  may  be  mentioned  the  Bureau  of 
Navigation,  Shipping  Commissioners,  Steamboat- 
Inspection  Service,  Light-House  Board  and  the 
Coast  and  Geodetic  Survey,  while  under  the  Treas- 
ury Department  in  addition  to  important  services 
rendered  shipping  interests  by  customs  officials  and 
treasury  agents,  some  reference  should  be  made  to 
the  part  played  in  this  field  by  the  Public  Health 
and  Marine  Hospital  Service,  the  Life-Saving  Serv- 
ice and  the  Revenue  Cutter  Service.  While  a  com- 
prehensive treatment  of  the  navy  is  outside  the 
scope  of  the  present  work  some  mention  should  be 
made  of  the  important  part  played  by  this  branch 

251 


COMMERCIAL     POLICIES 

of  the  public  service  in  furthering  the  commercial 
and  navigation  interests  of  a  country. 

i6o.  Bureau  of  Navigation  and  Shipping  Com- 
missioners.— The  Bureau  of  Navigation  was  estab- 
lished under  the  Treasury  Department  in  1884  and 
was  transferred  to  the  Department  of  Commerce 
and  Labor  upon  the  organization  of  the  latter  into 
a  special  department  in  1903.  This  Bureau  has 
general  supervision  over  the  merchant  marine  and 
merchant  seamen  of  the  United  States.  In  particu- 
lar it  is  charged  with  the  decision  of  questions  re- 
lating to  the  registry,  enrollment  and  licensing  of 
vessels,  and  the  filing  of  these  documents,  with  the 
supervision  of  laws  relating  to  the  admeasurement, 
letters  and  numbers  of  vessels  and  with  the  final 
decision  of  questions  concerning  the  collection  and 
refund  of  tonnage  taxes.  It  may  change  the  names 
of  vessels  and  must  prepare  an  annual  list  of  them. 
It  renders  each  year  a  report  to  the  Secretary  of 
Commerce  and  Labor  upon  the  operation  of  all  laws 
relating  to  navigation. 

Furthermore,  it  has  supervision  over  the  Shipping 
Commissioners  who  are  stationed  at  all  the  principal 
American  ports.  Their  duties  are  to  supervise  the 
shipping  articles  or  contracts  between  seamen  and 
masters  regarding  wages,  description  of  voyage  and 
terms  of  service.  They  also  enforce  the  laws  for 
the  protection  and  relief  of  seamen  in  matters  such 
as  seaworthiness  and  the  provisions  of  vessels,  dam- 
ages for  unjust  treatment,  discipline  and  the  pun- 
ishment of  mutiny  and  other  crimes.     At  the  smal- 

252 


NAVIGATION     PROMOTING 

ler  ports  the  duties  of  the  shipping  commissioners 
are  performed  by  customs  officials. 

i6i.  Steamboat-Inspection  Service. — The 
United  States  government  provided  for  the  inspec- 
tion of  steamships  as  early  as  1839.  The  service 
was  reorganized  by  an  act  of  1852  and  placed  under 
the  general  direction  of  the  Secretary  of  the  Treas- 
ury. It  was  transferred  to  the  new  Department  of 
Commerce  and  Labor  in  1903.  This  service  is 
charged  with  the  duty  of  inspecting  steam  vessels, 
and  the  licensing  of  ship  officers  and  has  general 
administration  of  the  laws  relating  to  vessels  and 
their  officers  so  far  as  they  have  to  do  with  the  pro- 
tection of  life  and  property.  At  the  head  of  the 
service  is  an  inspector-general ;  under  him  are  ten 
supervising  inspectors,  each  of  whom  has  control 
over  local  inspectors  within  an  assigned  district. 
The  supervising  inspector-general  and  the  super- 
vising inspectors  constitute  a  board  which  meets  an- 
nually at  Washington  and  establishes  regulations 
for  carrying  out  the  provisions  of  the  steamboat- 
inspection  laws. 

162.  Light-House  Board. — This  branch  of  the 
national  administration  was  organized  in  1789  but 
the  present  establishment  is  substantially  based  upon 
the  law  of  1852.  It  was  transferred  from  the  De- 
partment of  the  Treasury  to  that  of  Commerce  and 
Labor  in  1903.  The  administrative  duties  of  this 
board  include  the  construction  and  maintenance  of 
light-houses,  light  vessels,  light-house  depots,  bea- 
cons, fog  signals,  buoys,  and  their  appendages  as 
well  as  the  preservation  of  all  records  and  property 

253 


COMMERCIAL    POLICIES 

appertaining  to  the  light-house  establishment.  There 
are  at  the  present  time  sixteen  light-house  districts 
and  approximately  1,500  light-houses  and  beacon 
lights,  50  light  ships,  2,000  post  lights  and  6,000 
buoys  with  40  steam  tenders,  1,600  keepers,  1,200 
men  in  the  crews  of  vessels  and  1,600  laborers  in 
charge  of  post  lights  in  rivers  and  harbors.  The 
light-house  board  consists  of  the  Secretary  of  Com- 
merce and  Labor  who  is  president  ex  officio,  two 
naval  officers,  two  army  officers  and  two  civilians. 
Each  district  is  in  charge  of  a  navy  and  army  in- 
spector. The  former  has  charge  of  all  the  floating 
aids  to  navigation,  the  supplies  of  the  light  stations 
and  the  salaries  of  keepers.  He  is  required  to  in- 
spect the  lights  of  his  district  once  every  three 
months  and  to  report  their  condtion  to  the  board. 
The  army  inspector  has  charge  of  the  real  estate, 
buildings  and  apparatus  and  control  over  the  ma- 
chinists, carpenters  and  laborers  employed  in  con- 
struction and  repair  work.  Keepers  and  assistant 
keepers  of  light  houses  are  appointed  by  the  Secre- 
tary of  Commerce  and  Labor  and  general  superin- 
tendence, as  above  stated,  is  in  control  of  the  light- 
house board. 

163.  Coast  and  Geodetic  Survey. —  The  origin 
of  the  Survey  dates  from  a  recommendation  of 
President  Jefiferson  in  1807,  its  scientific  organiza- 
tion from  1832  and  its  present  name  from  1878.  It 
was  transferred  from  the  Treasury  to  the  Com- 
merce and  Labor  Department  in  1903.  As  at  pres- 
ent organized  the  general  management  is  in  the 
hands  of  a   superintendent   with   numerous  assist- 

254 


NAVIGATION     PROMOTING 

ants,  and  the  institution  is  charged  with  the  survey 
of  the  coasts  of  the  United  States  and  includes  base 
measure,  triangulation,  topography  and  hydro- 
graphy, the  survey  of  rivers  to  the  head  of  tidewater 
or  ship  navigation,  deep-sea  soundings,  tempera- 
ture and  current  observations  along  the  coast  and 
throughout  the  Gulf  and  Japan  streams,  magnetic 
observations  and  researches,  gravity  research,  de- 
termination of  heights,  the  determination  of  geo- 
graphic positions  by  astronomic  observations  for 
latitude,  longitude  and  azimuth,  and  by  triangula- 
tion to  furnish  reference  points  for  state  surveys. 
The  publications  of  the  Survey  comprise  annual  re- 
ports, charts  upon  various  scales,  including  sailing 
charts  of  the  coasts  and  harbors,  tide  tables  issued 
annually  in  advance,  sailing  directions  covering  all 
navigable  waters,  etc. 

164.  Public  Health  and  Marine  Hospital  Ser- 
vice.—  The  Marine  hospital  service  is  a  bureau  of 
the  Treasury  Department  and  is  charged  with  the 
management  of  marine  hospitals  and  relief  stations 
for  the  cure  of  sick  and  disabled  seamen  of  the 
American  merchant  marine.  It  also  has  supervision 
over  the  national  quarantine  stations,  the  investiga- 
tion and  suppression  of  epidemics  and  plagues,  the 
collection  and  dissemination  of  mortality  statistics 
and  sanitary  information,  the  scientific  investiga- 
tion of  sanitary  problems  and  the  examination  of 
immigrants.  The  bureau  owes  its  origin  to  an  act 
of  Congress  in  1798.  In  1870  the  service  was  re- 
organized and  placed  in  charge  of  a  surgeon-gen- 
eral.    The  marine  hospitals  are  located  in  all  im- 

255 


COMMERCIAL    POLICIES 

portant  internal  and  external  ports  of  the  United 
States  including  the  ports  of  its  new  insular  posses- 
sions. In  1902  the  bureau  was  given  the  official 
title  of  Public  Health  and  Marine  Hospital  Service. 

165.  Life-Saving  Service. — The  life-saving  serv- 
ice of  the  United  States  was  organized  in  its  present 
form  under  the  Department  of  the  Treasury  in  1871. 
It  is  in  control  of  a  general  superintendent  who  has 
supervision  over  the  entire  service  and  prepares  an 
annual  report  on  all  marine  disasters  in  the  United 
States  including  disasters  to  all  American  vessels  in 
foreign  ports.  The  coast  line  is  divided  into  dis- 
tricts each  under  an  experienced  superintendent 
who  selects  keepers  for  all  the  stations  of  his  dis- 
trict and  is  responsible  to  the  general  superintendent 
for  their  efficiency.  Each  station  force  consists  of 
six  men  besides  the  keeper.  The  stations  are  in 
opration  from  September  to  May  on  the  sea  and 
Gulf  coasts  and  during  the  navigation  season  on  the 
great  lakes.  The  purpose  of  the  service  is  the  sav- 
ing, not  only  of  life  but  also  of  property. 

166.  Revenue  Cutter  Service. —  This  service  was 
organized  by  Congress  in  1790  and  made  a  part  of 
the  Treasury  Department,  Its  duties  consist  in  the 
enforcement  of  nearly  every  statute  relating  to  na- 
tional maritime  interests.  Among  these  duties  may 
be  mentioned  the  protection  of  the  customs  revenue, 
the  enforcement  of  laws  against  smuggling  and 
those  relating  to  national  quarantine,  neutrality, 
navigation,  steamboat  inspection,  suppression  of 
piracy,  robbery  and  mutiny,  protection  of  seal  fish- 
eries, illegal  traffic  in  firearms,  and  the  protection  of 

256 


NAVIGATION     PROMOTING 

wrecked  property  and  timber  reserves  of  the  United 
States.  Its  duties  also  include  the  enforcement  of 
laws  for  the  suppression  of  the  slave  trade  and  of 
laws  which  require  life-saving  appliances  to  be  kept 
on  merchant  vessels.  During  dangerous  and  in- 
clement weather  revenue  cutters  are  required  to 
cruise  along  the  coasts  and  render  assistance  to 
vessels  in  distress.  Besides  fixed  duties  it  is  re- 
quired to  perform  from  time  to  time  such  services 
as  aiding  the  Light  House  Establishment,  the  Pub- 
lic Health  and  Marine  Hospital  Service,  the  Coast 
and  Geodetic  Survey,  the  Life  Saving  Service,  etc. 
Each  vessel  is  assigned  a  certain  district  and  these 
districts,  being  contiguous,  cover  the  entire  coast 
of  the  United  States. 

167.  Navy  Department. — A  glance  at  a  list  of 
the  various  bureaus  of  the  Navy  Department  sug- 
gests many  services  which  this  department  renders 
the  navigation  and  commercial  interests  of  the  coun- 
try. Originally  the  purposes  of  naval  and  merchant 
vessels  were  united.  Early  merchant  vessels  were 
also  armed  vessels.  The  navy  has  relieved  the  mer- 
chant marine  of  the  burden  of  defense.  In  modern 
times  a  certain  equilibrium  is  desirable  between  the 
navy  on  the  one  hand  and  the  navigation  and  com- 
mercial interests  on  the  other.  The  size  of  the  navy 
should  be  in  some  proportion  to  the  foreign  political 
and  commercial  interests  of  a  country.  It  is  the  best 
guarantee  of  peace  and  the  only  guarantee  of  pro- 
tection in  a  country  like  Great  Britain,  the  United 
States  or  Germany.  The  purposes  of  a  navy  have 
been  eloquently  stated  in  the  annual  Presidential 
17  257 


COMMERCIAL     POLICIES 

message  of  1904  in  the  following  language :  "There 
is  no  more  patriotic  duty  before  us  as  a  people  than 
to  keep  the  navy  adequate  to  the  needs  of  this  coun- 
try's position.  We  have  undertaken  to  build  the 
Isthmian  Canal.  We  have  undertaken  to  secure  for 
ourselves  our  just  share  in  the  trade  of  the  Orient. 
We  have  undertaken  to  protect  our  citizens  from 
improper  treatment  in  foreign  lands.  We  continue 
steadily  to  insist  on  the  application  of  the  Monroe 
Doctrine  to  the  Western  Hemisphere.  Unless  our 
attitude  in  these  and  all  similar  matters  is  to  be  a 
mere  boastful  sham  we  cannot  afford  to  abandon  our 
naval  programme.  Our  voice  is  now  potent  for 
peace  and  is  so  potent  because  we  are  not  afraid  of 
war.  But  our  protestations  in  behalf  of  peace 
would  neither  receive  nor  deserve  the  slightest  at- 
tention if  we  were  impotent  to  make  them  good." 

BIBLIOGRAPHY 

A.  Consult  bibliography  of  chapters  XIIL,  XIV.,  XV., 
XVII. 

B.  Coast  and  Geodetic  Survey,  Work  of,  1905;  *Com- 
merce  and  Labor  Dept.,  Organization  and  Law  of,  1904; 
*Com.  and  Labor  Dept.,  Ann.  Reports  of;  *Cong.  Direc- 
tory; Surgeon  Gen'l.,  Ann.  Report  of  (Marine  Hosp. 
Service.) 

C.  Diet  and  encyc.  (especially  various  articles  in  *Ne\v 
Inter.  Encyc.)  ;  Poole's  Index. 

D.  *Fairlie's  Nat.  Admin,    (with  bibliog.). 

E.  Co  St  and  Geod.  Survey,  Science,  VII.,  2,  460, 
VIII.,  359,  XII.,  50,  XVIIL,  33;  Nat.  Geog.  Mag.  XIV, 
I ;  Garner,  J.  W.,  Federal  Activity  in  the  Interest  of  Pub- 
lic Health,  Yale  R.,  Aug.  '05 ;  Johnson.  A.  B.,  The  Modern 
Light-house  Service,  Cent.,  XXXII.,  219;  Kimball,  S.  I., 
Organization  and   Methods  of  United  States  Life   Saving 

258 


NAVIGATION     PROMOTING 

Service,   Harper  LXIV.,   357,    Pop.    Sci.    Mo.,   XLIV.,  346, 
Cent.,  XXXIIL,  925. 

SUGGESTIVE  TOPICS  AND  QUESTIONS 

1.  Suppose  an  American  steamship  owner  does  not 
comply  with  the  provisions  of  the  steamship  inspection 
law?     Fairlie's  Nat.  Adm.,  p.  240. 

2.  Chief  provisions  of  the  American  Passenger  Act 
of  1882?     (Nav.  Laws  of  U.   S.,  Part  IX.). 

3.  What  are  the  chief  provisions  of  the  American 
navigation  laws  regulating  trade  with  Hawaii?  (Nav. 
Laws  of  U.  S.,  Part  XX.)  with  Porto  Rico?  (id.  Part 
XXL);  with  the  Philippines?  (id.  Part  XXL);  with 
Alaska?     (id.   Part  XXIII.) . 

4.  What  are  some  of  the  more  important  laws  of  the 
United  States  regarding  obstructions  to  navigation?  (id. 
Part  XXXVIIL). 

5.  Explain  the  organization  of  the  United  States 
Weather  Bureau.  In  what  ways  is  it  serviceable  to 
navigation?  (Art.  "Weather  Bureau"  in  New  Inter 
Encyc). 

GENERAL   BIBLIOGRAPHY 

The  appended  list  of  books  contains  the  books  referred 
to  in  the  body  of  the  present  work  as  well  as,  in  a  few  cases, 
the  names  of  books  consulted  but  not  directly  referred  to. 
The  arrangement  of  the  bibliographies  at  the  end  of  chapters 
is,  as  far  as  possible,  in  the  following  order. 

A.  Cross    references. 

B.  Government  publications. 

C.  General  references  such  as  dictionaries  and  ency- 
clopaedias. 

D.  Special   references. 

E.  Periodical   Literature. 

The  abbreviations  used  throughout  the  book  are  ex- 
plained, for  the  most  part,  in  the  general  bibliography 
which  follows,  excepting  the  abbreviations  for  court  deci- 
sions, the  explanation  of  which  may  be  found  in  any  dic- 

259 


COMMERCIAL     POLICIES 

tionary  or  encyclopaedia  of  law.  United  States  govern- 
ment documents  are  indexed  in  the  Document  Catalogue 
(sessional  and  monthly)  as  well  as  in  indexes  for  special 
departments.  Periodical  literature  has  been  indexed  by 
Poole  and  others  and  these  indexes  are  to  be  found  in 
any  library  of  considerable  size. 

B.    GOVERNMENT  PUBLICATIONS 

American  Republics,  Monthly  Bulletin  of  the  Interna- 
tional Bureau  of. 

Anderson,  M.  P.,  Laws  relating  to  Customs,  Washing- 
ton, D.  C,  1899. 

Census  XII.,  of  United  States. 

Census  XII.,  of  United  States,  Abstract  of. 

Commerce  and  Labor,  Organization  and  Law  of  the 
Department  of,  1904. 

Commerce  and  Navigation  of  United  States,  Annual. 
Department  of  Commerce  and  Labor. 

Commercial  Relations  of  United  States,  Annual,  De- 
partment of  Commerce  and  Labor. 

Congressional  Directory  (sessional). 

Congressional  Record  (daily  during  sessions  of  Con- 
gress). 

Consular  Regulations  of  United  States,  1896  (new  edi- 
tion  announced). 

Consular   and  Trade   Reports    (Daily  and    Monthly). 

Customs   Regulations   of   United   States,    1900. 

Digest  of  Decisions  of  Treasury  Department  (customs) 
and   Board  of  General    Appraisers    (annual). 

Diplomatic  Officers  of  United  States,  Instructions  to, 
1897. 

Foreign  Relations  of  United  States  (annua! ;  general 
index,  1861-1899). 

Industrial  Commission  of  United  States,  Report  of  (19 
vols,  each  volume  indexed  and  general  index  in  vol.  XIX), 
1898-1902. 

Mercantile  Marine  Subsidies,  List  of  Books  on,  2nd  ed. 
Library  of  Congress,   1903. 

260 


NAVIGATION     PROMOTING 

Messages  and  Papers  of  the  Presidents  (general  index 
in  volume  X  and  in  succeeding  volumes.  First  ten  vol- 
umes published  by  the  Government). 

Moore,  J.  B.,  Digest  of  International  Law,  1906,  8  vols. 
(vol.  8  contains  index). 

Navigation  an !  the  Merchant-Marine,  Laws  of  the 
United   States  relating  to,   1903   (new  edition   announced). 

Procter,  R.  G.,  Tariff  Acts  of  United  States,  1789-1897, 
1898. 

Revised   Statutes  of  the  United  States. 

Statistical  Abstract  of  the  United    States    (annual). 

Statutes  at  Large,  United   States. 

Tariffs  of  Foreign  Countries,  Special  Consular  Reports, 
1892- I 900. 

Tariffs  of  Foreign  Countries,  List  of  Works  on.  Li- 
brary of  Congress,  igo6. 

Treaties  and  Conventions  between  the  United  States 
and  other  Powers,  1776-1886,  1889. 

Treaties  in  Force,  1904. 

C.    GENERAL  REFERENCES 

American  and  English  Encyclopaedia  of  Law,  London, 
1896- 1905,  30  vols. 

Bouvier's  Law  Dictionary  (Rawle's  Ed.)  Boston,  1897, 
2   vols. 

Conrad  (et  al),  Handworterbuch  der  Staatswissen- 
schaften  Jena,  2nd  ed.,   1898-1901,  7  vols. 

Elster's  (et  al),  Worterbuch  der  Volkswirthschaft, 
Jena,  1898,  2  vols. 

Encyclopaedia  Americana,  N.   Y.,  1904,   16  vols. 

Encyclopaedia  Britannica,  Ninth  and  Tenth  English 
Edition. 

Guyot,  Y.,  and  Raffalovich,  A.,  Dictionnaire  du  Com- 
merce, de  L'Industrie  et  de  la  Banque,  Paris,  2  vols. 

Holzendorff,  Handbuch  des  Volkerrechts,  Hamburg, 
1881,  3   vols. 

Lalor,  J.  L.,  Cyclopaedia  of  Political  Science,  Political 
261 


C  O  ^I  M  E  R  C I  A  L    POLICIES 

Economy  and  United  States  History,  Chicago,  1881-4,  3 
vols. 

Lamed,  J.  N.,  History  for  Ready  Reference,  Springfield, 
Mass.,  5  vols. 

McCulloch,  J.  R.,  Dictionary  of  Commerce  and  Com- 
mercial   Navigation    (A.   J.   Wilson   ed.),   London,    1882. 

New  International  Encyclopaedia,  New  York,  1904,  20 
vols. 

Palgrave,  R.  H.  J.,  Dictionary  of  Political  Economy, 
London  and  New  York,  1894-9,  3  vols. 

Schonberg,  G.  F.  von,  Handbuch  der  Politischen  Oeko- 
nomie,  Tubingen,  4th  ed.,  1896-8,  5  vols. 

Statesman's  Yearbook  (J.  S.  Keltic  ed.),  London  and 
New  York. 

Universal  Cyclopaedia  and  Atlas,  New  York,  1905,  13 
vols. 

D.    SPECIAL  REFERENCES 

Adams,  H.  C,  Relation  of  the  State  to  Industrial  Ac- 
tion, American  Economic  Association,  1887. 

Adams,  H.  C,  Taxation  in  the  United  States,  1789-1816, 
Baltimore,   Johns   Hopkins    University   Studies,    1S84. 

Andrew,  H.  T.,  Manual  of  United  States  Customs 
Tariff  Laws,  G.  W.  Dillingham  &  Co.,  New  York,  1904. 

Andrews,  E.  B.,  Institutes  of  Economics,  Silver,  Bur- 
dett  &  Co.,  New  York,  1900. 

Armitage-Smith,  G.,  The  Free  Trade  ]\Iovement,  Lon- 
don, 1898. 

Ashley,  Percy,  Modern  Tariff  History,  London,  Mur- 
ray, 1905. 

Ashley,  W.  J.,  Economic  History  of  England,  London 
and  New  York,  Longmans  Green  &  Co.,  1888,  1893,  2  vols. 

Ashley,  W.  J.,  The  Tariff  Problem,  London,  P.  S. 
King  &  Son,  1904. 

Bastable,  C.  F.,  Commerce  of  Nations,  London,  Meth- 
uen  &  Co.,  1892. 

Bastable,  C.  F.,  Theory  of  International  Trade,  London 
and  New  York,  Macmillan  &  Co.,  (4th  ed.),  1903. 

262 


NAVIGATION     PRO^IOTING 

Bates,  W.  W.,  American  Marine,  Boston,  Houghton, 
Mifflin  &  Co.,  1897. 

Bates,  W.  W.,  American  Navigation,  Boston,  Hough- 
ton, Mifflin  &  Co.,  1902. 

Beer,  A.,  Geschichte  des  Welthandels,  Wien,  1860-84, 
3    vols. 

Beer,  G.  L.,  Commercial  Policy  of  England  toward 
the  American  Colonies,  Studies  in  History,  Economics  and 
Public  Law,  New  York,  Columbia  University,   1893. 

Blackmore,  E.,  The  British  Mercantile  Marine,  London, 
C.  Griffin  &  Co.,  1898. 

Blanqui,  J.  A.,  History  of  Political  Economy  in  Europe, 
(tr.  by  E.  J.  Leonard)  New  York,  G.  P.  Putnam's  Sons, 
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Bogart,  E.  L.,  Industrial  History  of  United  States, 
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272 


INDEX 


Abbott,    Lyman,     on    present 

political   situation,   36. 
Abstract,  Statistical,  of  U.  S., 

ig8,    221. 
Academic    Classes    on    Tariff, 

43- 

Active    trade,    8. 

Aden,   a  free  port,   120. 

Administration  of  tariff,  89, 
102-104. 

Administrative  institutions, 
Ch.   IX. 

Adrianople,    Treaty    of,    235. 

Adriatic,  claims  of  Venice  to, 
234- 

Ad  valorem  duties,  Ch.  VIII ; 
definition  of,  64 ;  advan- 
tages and  disadvantages 
of,    99-101. 

Africa,  see  "South  Africa" ; 
export  duties  in,  74,  75  ; 
prohibitions    in,    82. 

Agricultural  classes,  in  Eu- 
rope, early  position  on 
tariff,  43  ;  protection 
among,   64. 

Agriculture,  U.  S.  Depart- 
ment  of,    195-197. 

Altona,  a   free  port,   iig-120. 

Alsace-Lorraine,  incorpora- 
tion in  German  Empire  of, 
222. 

Amazon  river,  navigation  of, 
157. 

American  exports,  cost  of 
carrying,  226 ;  methods  of 
obtaining  commercial  sta- 
tistics  of,    220-221. 

American  tariff,  contents  of, 
87-88. 

18  273 


Ancient  commerce,  develop- 
ment of,  12;  general  char- 
acter of,  11;  conception  of, 

3,  4- 

Ancient  world,  right  of  navi- 
gation in,   334. 

Animals,  free  importation  of 
breeding,   141. 

Anti-Corn    Law    League,    41. 

Appraisers,   Board  of,    103. 

Arabs,  early,    12. 

Arbitration  clause  in  treat- 
ies,  157-158. 

Argentine,  no  reciprocity 
with,    167. 

Armour,   Mr.,    214. 

Army  inspector  of  light 
houses,  259 ;  supplies  in 
American  vessels,  246. 

Art,  free  importation  of 
works  of,    141. 

Asia,  export  duties  in,  74- 
75  ;    prohibitions   in,   82. 

Associations,    national,    192. 

Attaches,  commercial,  192; 
commercial,  proposed  for 
American  diplomatic  serv- 
ice,  192. 

Australia,  export  bounties  in, 

133- 

Austria,  export  syndicates  in, 
211-212;  sugar  exempted 
from  most  favored  nation 
treatment  in  treaty  be- 
tween   France    and,    172. 

Austria-Hungary,  commercial 
policy  of,  59  ;  discriminat- 
ing duties  in  tariff  of,  105  ; 
free  ports  of,  119;  general 
and    conventional   tariff  in, 


INDEX 


93,  148 ;  limitations  of  in- 
ternal taxes  on  imported 
articles  in,  129  ;  mercantile 
associations  in,  104;  method 
of  value  estimation  in, 
220  ;  payment  of  duties  in 
gold  in,  104;  prohibitions 
in,  83  ;  tariff  administra- 
tion in,  90  ;  tariff  war  be- 
tween Roumania  and,  no; 
territorial  scope  of  tariff' 
in,  go. 
Austrian  cotton  spinners, 
bounty   by,    135. 

Balance  of  Trade,  Ch.  XVI, 
25-27,    224-225. 

Balkan  States,  limitation  of 
internal  taxes  on  imported 
articles  in,  129;  right  to 
negotiate  commercial  treat- 
ies  in,    148. 

Baltic,  claims  of  Denmark 
and  Sweden  to,  234. 

Banks,   export,   206,   212. 

Bay  of  Biscay,  claims  of 
England    to,    234. 

Belgium,  commercial  policy 
of,  59  ;  general  and  autono- 
mous tariff  in,  92 ;  most 
favored  nation  treaty  be- 
tween Zollverein  and,  171  ; 
scope  of  most  favored  na- 
tion clause  in  treaty  be- 
tween Holland  and,  172; 
statistical    method    in,    220. 

Berlin,  American  chamber  of 
commerce  at,  221  ;  export 
bank  at,  212;  export  sam- 
ple   warehouse    in,    210. 

Bismarck    on    protection,    58. 

Black  Sea,  rights  of  Turkey 
and    Russia   in,   235. 

Blaine,  J.  G.,   166. 

Boards    of  Trade,    213-214. 

Bonded  warehouses,  meaning 
and  advantages  of,  115; 
for    imported    goods,    gen- 


eral regulations  regarding, 
in  U.  S.,   118. 

Books,  free  importation  of, 
145. 

Border  traffic,  (see  "frontier 
traffic"  and  "most  favored 
nation   clause"),    173. 

Bosphorus,  rights  of  Turkey 
and  Russia  in,  235. 

Boundaries,   changes   in,   222. 

Bounties,  by  whom  paid,  135  ; 
effect  of,  109;  how  offset, 
109;  indirect  or  concealed 
export,  134,  135,  242;  in- 
ternational sugar,  136-137; 
open  or  direct  export,   132- 

134- 
Bradstreet,  213. 
Brandy,    indirect    bounty    on, 

134- 
Bremen,  a  part  of  Zollverein, 

91  ;  a  free  port,  119,  120. 
British  wheat,  export  bounty 

on,    133. 

Canada,  discriminating  dut- 
ies against  railroads  of, 
106;  "dumping"  duty  in, 
70 ;  grain  imported  into 
U.  S.  from,  140;  preferen- 
tial policy  of,  109 ;  pro- 
tection   prohibitions  in,   78. 

Canals  and  rivers,  treaties 
regarding,    158. 

Capitulations,    Turkish,    146. 

Caprivi  on  protection,  58 ; 
treaties,  153. 

Caracas,  export  sample  ware- 
house at,  210. 

Carthage,  commercial  treaty 
between   Rome  and,    146. 

Census,  Bureau  of  U.  S.,  199. 

Central  America,  export  duty 
in,  74,  75 ;  general  or  au- 
tonomous tariff  in,  92 ; 
prohibitions    in,    82. 

Chamberlain,    Joseph,    109. 

Chamber    of    Commerce,    do- 


274 


INDEX 


mestic,  213-214;  in  foreign 
countries,   210-21 1. 

Channel,  claims  of  England 
to,    234. 

Chilean  nitrates,  export  duty 
on,  74. 

China,  prohibitions  in,  82 ; 
tariff  administration  in, 
90 ;  tariff  schedules  in 
treaties  with,  156  ;  treaty 
ports   of,   124. 

Civil    War,    see    "war." 

Civilization,  early,  lacked,   10. 

Classical  School,  vs  Histori- 
cal School,   48. 

Classification  of  commerce, 
6,  7  ;  commercial  statistics, 
217-219. 

Clay,  H.,  vs.  protection,  49, 
51- 

Cleveland,  G.,  executive  or- 
der of  September  20,  1905, 
of,   185 ;    on   the   tariff,   54. 

Coal,  drawback  on,    132. 

Coast  and  Geodetic  Survey, 
254-255- 

Coasting  trade  in  American 
law,  239  ;  law  extended  to 
Philippines,  246 ;  treaty 
reservations  regarding,  155. 

Cobden,    R.,   41,   44. 

Cobden  treaty,  147;  most 
favored  nation  clause  in, 
171. 

Coffee  in  reciprocity  treaties, 
166,   167. 

Colbert  and  Colbertism,  27- 
29. 

Collectors  of  customs,   103. 

Collins   line,  243,   244. 

Columbia  river,  navigation 
of,    156. 

Colonial  preferential  duties, 
108,   109. 

Colonies,  right  of,  to  negoti- 
ate treaties,   149. 

Commerce,   ancient  and  mod- 


ern conception  of,  3,  4 ; 
and  Labor  U.  S.  Depart- 
ment of,  197-200,  251  ;  and 
Navigation,  annual  volu- 
ume  on,  198,  221  ;  classifi- 
cation of,  6,  7 ;  materials 
of,  6,  7  ;  meaning  of,  5,  6  ; 
Montesquieu  on,  3  ;  rela- 
tion to  Economics  and  In- 
dustry, 5,  6 ;  two  charac- 
teristics of,  3,  4  ;  vs.  trade, 
6  ;   world,  8. 

Commercial  attaches,  192; 
proposed  for  U.  S.  diplo- 
matic   service,    192-194. 

Commercial  classes,  views  of, 
on   tariff,    43. 

Commercial  Relations  of 
U.    S.,    annual    volume    on, 

180,  200. 

Commission  business  of  cer- 
tain   countries,    227. 

Commissions,  trade,  201,  202. 

Commodity,    definition    of,    7. 

Constitution  of  U.  S.,  com- 
merce  in,   108,   239. 

Constitutional  power  regard- 
ing treaties,   149. 

Construction    premiums,    241. 

Consular,  appointments  and 
promotions,  185,  186 ;  reg- 
ulations, present,  186; 
Bureau,  179;  invoices,  102, 
103,  220;  law,  present 
American,  182-185  ;  re- 
ports,   180,   200. 

Consular  Service,  criticism 
of  American,  189-191  ;  de- 
velopment     of      American, 

181,  182;  general,  179-181  ; 
regulations  governing  ex- 
aminations and  promotions 
in,    187-189. 

Consuls,    early,    14. 
Continental       system,      see 

"Napoleonic     wars,"      also 

43- 
Convention,  meaning  of,   145. 


275 


INDEX 


Copenhagen,  free  district  of, 

121. 

Copyrights,  prohibition  of 
importing  infringements  on, 

79. 

Corn  laws,  meaning  of,  41. 

Cossa,  criticism  of  mercan- 
tilism by,  27-29 ;  three 
phases  of  mercantilism  ac- 
cording to,   24-27. 

Cotton  spinners,  bounties  by 
Austrian,   135. 

Countervailing  duties,  109, 
jio,   137. 

Credit,  bonded  warehousing 
a  system  of,   116. 

Crusades,  effect  of,  on  com- 
merce,   16,    22. 

Cuba,  civil  records  of,  201  ; 
reciprocity  treaty  with,  164, 
169. 

Cunard  line  subsidy,  242,  243. 

Customs,  chapters  V,  VI, 
VII,  VIII,  IX;  collectors 
of,  103  ;  Division  of  (U.  S. 
Treasury  Department),  195. 

Customs  Duties,  Ch.  VIII ; 
classification  of,  63-65  ; 
colonial  preferential,  108, 
109;  countervailing,  109, 
no;  definition  and  develop- 
ment of,  62,  63  ;  discrimin- 
ating, on  vessels  and  car- 
goes, 105,  106;  payment 
of,  104-106 ;  retaliatory, 
no.  III. 

Danube,   navigation   of,   157. 

Declaration  of  Independence, 
37. 

Democratic  party  on  protec- 
tion,   54,   55. 

Denmark,  Baltic  tolls  and, 
157.  234,  23s ;  general  or 
autonomous  tariff  in,  92. 

Destination,  country  of,  221, 
222. 

Differential  duties,  Ch.  VIII. 


276 


Direct    trade,    8 ;    reciprocity 

in,    162,    163,    240. 
Dingley     tariff    act,    purpose 

of,  54- 
Discoveries,     effect     of     the 

great,   22. 
Discriminating     duties,      105, 

106,   162. 
Discrimination     policy,     236- 

240  ;  of  U.   S.,  239. 
Domestic   trade,  8. 
Double     or      multiple     tariff 

system,  see  "maximum  and 

minimum    tariff   system."' 
Drawbacks,   130,    131. 
Drawback    system    in    U.    S., 

131.  132. 
Dumping   and  trusts,   69,    70. 
Dun,  213. 
Duties,  see  "customs  duties." 

East  Indies,  prohibitions  in, 
82. 

Economics,  relation  to  com- 
merce and   industry,   5,   6. 

Ecuador,  reciprocity  with, 
168. 

Egypt,  right  of,  to  negotiate 
treaties,  198;  tariff  admin- 
istration in,  90. 

Elbe     river,     navigation     of, 

157- 

Embargo,  effect  of,  on  pro- 
tection, 50. 

Empty  packages,  free  re-im- 
portation of,   137. 

England,  see  also,  "British," 
"Great  Britain,"  "United 
Kingdom" ;  as  an  entrepot, 
227  ;  anticipated  tariff 
changes  in,  91  ;  Cobden 
treaty  between  France  and, 
147;  colonial  preferential 
policy  of,  108;  commercial 
attaches  in,  192 ;  commer- 
cial policy  of,  60  ;  commis- 
sion business  of,  227 ; 
early    claims    of,     to    high 


INDEX 


seas,  234 ;  Eden  treaty  be- 
tween France  and,  146 ; 
effect  of  sugar  bounties  in, 
136,  137  ;  export  duties  in, 
74 ;  free  trade  advantages 
of,  41  ;  Methuen  treaty  be- 
tween Portugal  and,  146; 
(early)  most  favored  na- 
tion treaty  of,  169 ;  most 
favored  nation  treaty  be- 
tween Zollverein  and,  241, 
242 ;  navigation  policy  of, 
2Z7^  238 ;  shipping  subsidy 
policy  of,  241,  242 ;  terri- 
torial scope  of  tariff  of, 
90. 

English  investments  and  loans 
in  foreign  countries,  227  ; 
ship   owners'    receipts,    226. 

Entrepots,    certain    countries 

as,    22'J. 

"Enumerated"  goods  in  Eng- 
lish   navigation  laws,   238. 

Equipment    premiums,    241. 

Equivalent  principle  regard- 
ing drawbacks,    131,    139. 

Europe,  commercial  policy  in 
early  part  of  XIX  cen- 
tury,  42-44. 

Exchange,  foreign  bills  of, 
228. 

Excises,    127,    128. 

Exclusion  policy  in  naviga- 
tion, 236-240. 

Executive  orders  relating  to 
consular  service,  182,  185, 
189. 

Exequators,   178,    181. 

Exhibition  purposes,  free  re- 
importation of  articles  for, 
137- 

Export  banks,  206,  212. 

Export  duties,  Ch.  VI  (defi- 
nition and  classification  of, 
63,  Ti,  74 ;  mercantilism 
and,  Ch.  II,  tj,  ;  prohibi- 
tions   and,    -jT,   78 ;    protec- 


tion,  75  ;   revenue,   74,   75 ; 

favors)  ;  Ch.  X. 
Export    Sample    warehouses, 

209,  210. 
Export    Statistics    of    U.    S., 

221;    syndicates,    211-213. 
Export  Trade,  8. 
Exports,      cost     of     carrying 

American,      226 ;      declared 

for  U.  S.,  220. 
Exports    and   imports,   invisi- 
ble,  22^,   22^ ;   visible,    225, 

226. 

Factories,    character   of,    14. 

Fishing  bounties,   133,   241. 

Fiume,  part  of  Austro-Hun- 
garian  tariff  union,  91  ; 
discriminating  duties  at, 
105;    free    port   of,    119. 

Food  products,  import  du- 
ties on,    66. 

Foreign  commerce  conven- 
tion,  202  ; 

Foreign   Exchange,   Ch.  XVI. 

Foreign  Markets,  Division  of, 
196,    197. 

Foreign   Trade,   8. 

France,  anticipated  tariff 
changes  in,  91  ;  bounties  in, 
'^ZZ<  13s  ;  Cobden  treaty  be- 
tween England  and,  147 ; 
colonial  preferential  policy 
of,  108  ;  continental  system 
in,  43  ;  Eden  treaty  between 
England  and,  146;  free 
ports  in,  119;  maximum  and 
minimum  system  in,  94-95, 
148;  mercantilism  in,  32, 
2,Z  \  methods  of  value  esti- 
mation in,  220  ;  navigation 
policy  of,  22,7 ;  protection 
in,  56-58;  reciprocity  with, 
167,  168;  subsidy  policy  of, 
242  ;  sugar  exempted  from 
most  favored  nation  treat- 
ment between  Austria  and, 
172;     tariff     war     between 


277 


INDEX 


Italy  and,  no;  between 
Switzerland  and,  no;  tour- 
ist expenditures  in,  228 ; 
U.  S.  most  favored  nation 
treaty  with,    170. 

Frankfort  treaty,  scope  of 
most  favored  nation  clause 
in,    172. 

Free  districts,  120,  121  ;  pro- 
posed   American,    121,    122. 

Free  importation  of  foreign 
articles  to  be  re-exported 
after  alteration  or  repair: 
general,  139,  140;  U.  S., 
140. 

Free  list,  89 ;  articles,  mis- 
cellaneous,   140-142. 

Free  ports,    1 18-120. 

Free  trade,  Ch.  Ill ;  see 
views  of  various  classes 
on  (academic,  agricultural, 
commercial,  official,  indus- 
trial) ;  also  see  various 
countries. 

Free  trade  era,  European 
treaties    of,    147. 

Free  Zone  (Mexican),  123, 
124. 

Freedom  of  navigation,  (see 
navigation  politics)  233, 
235.  236. 

Freight  charges  in  trade  bal- 
ances,  226. 

French,  treaties  written  in, 
151  ;  Revolution,  economic 
effects  of,  40 ;  tariff,  dis- 
criminating  duties   in,    105. 

Frontier  traffic  in  narrower 
sense,   122,   123. 

Gallinger     Commission      (see 

also    "merchant    marine"), 

246. 
Garner,   J.  W.,   on  American 

Merchant    Marine,    245. 
General      and      conventional 

tariff    systems,    (see    "tariff 

systems"). 
General   or  autonomous  tariff 


278 


systems,  (see  "tariff  sys- 
tems"). 

General  commerce,  meaning 
of,   217,   226. 

Qerman-Japanese  treaty, 
scope  of  most  favored  na- 
tion treaty  in,   172. 

German  steel  makers,  boun- 
ties by,    135. 

German    steel   subsidies,    242. 

German    tariff,    character    of, 

87. 

Germany,  agricultural  atta- 
ches in,  192.  continental 
system  in,  43  ;  export 
bounties  in,  i33-i35 ;  free 
ports  in,  119;  mercantile 
commissions  in,  104;  meth- 
od of  value  estimation  in, 
220 ;  most  favored  nation 
claims  of,  in  American-Ha- 
waiian treaty,  173;  navi- 
gation policy  of,  2.n  ;  pro- 
hibitions in,  82  ;  adminis- 
tration of  prohibitions  in, 
78 ;  protection  in,  58,  59 ; 
reciprocity  with,  168  ;  tariff 
administration  in,  90  ;  tar- 
iff, general  and  conven- 
tional in,  93  ;  tariff,  recent, 
of,  148;  territorial  scope 
of  tariff  of,  90  ;  tariff  war 
between  Russia  and,  no; 
tariff  war  between  Spain 
and,  no;  treaties,  modern, 
of,    148. 

Gibraltar,  a  free  port,   120. 

Gold  and  silver  in  statis- 
tics, 219,  226. 

Gold  payment  of  duties,  ef- 
fect of,   104,   105. 

Goods,   definition   of,  7. 

Government  documents,  free 
importation   of,    141. 

Great  Britain,  (see  "British," 
and  "England")  ;  import 
duties  in,  66 ;  methods  of 
value    declaration    in,    220, 


INDEX 


221  ;  prohibitions  in,  78 ; 
protection  prohibitions  in, 
82,  83  ;  tariff  of,  character 
of,  87 ;  tariff,  general  or 
autonomous,    in,    92. 

Great  Britain  and  U.  S., 
navigation  of  rivers  by, 
156.  157;  reciprocity  be- 
tween,   162,    163. 

Greece,  anticipated  tariff 
changes  in,  91  ;  commer- 
cial policy  of,  13  ;  concep- 
tion of  commerce  in,   13. 

Grotius,  Hugo,  234. 

Hamburg,  a  free  port,  iig, 
120 ;  a  part  of  German 
Zollverein,   91. 

Hamilton,   A.,  99,    134. 

Hansa,  origin  and  govern- 
ment  of,    17. 

Hanseatic  League,  exclusion 
policy  of,   236,  2T,7. 

Hawaii,  reciprocity  treaty  of, 
164,    173. 

Health  (Public)  and  Marine 
Hospital   Service,   255,    256. 

Historical  School  vs.  Classi- 
cal  School,  48. 

Holland,  colonial  preferential 
policy  of,  108  ;  commercial 
policy  of,  59 ;  most  fav- 
ored nation  treaty  between 
Belgium  and,  172;  tariff, 
general  or  autonomous,  in, 
92. 

Home  market  argument  for 
protection,   51. 

Hong  Kong,  a  free  port,  120. 

Hospitality,  ancient  right  of, 
12. 

Household    effects,    free    im- 
portation   of,    141. 
Hume,  D.,  39. 

Huskisson,  41. 

"Identity"  principle  in  draw- 
backs,   131,    139. 


Immigrants,    remittances    by, 

228. 
Import    duties,    Ch.    V ;    defi- 
nition and  classification  of, 
63,    65-67 ;    present    impor- 
tance of,   66,   6-7. 

Import,  favors,  Ch.  X ;  pro- 
hibitions, TT,  78  ;  statistics 
of  U.  S.,  220,  221  ;  trade  8. 

Imports  and  exports,  invisi- 
ble, 226,  227 ;  visible,  225, 
226. 

Income   tax,    127. 

Index  numbers  as  a  method 
for  statistical  comparisons, 
224. 

India,  countervailing  duties 
in,  137  ;  effect  of  export 
sugar  bounties  in,  137  ! 
right  to  negotiate  commer- 
cial treaties  in,   149. 

Indirect  trade,  8,  163,  164, 
240. 

Industrial  classes  on  tariff, 
44. 

Industrial    protection,    64. 

Industrial  Revolution  in  Eng- 
land, 40. 

Industry,  relation  to  com- 
merce and  economics,  5,  6. 

Infant  industry  argument 
for  protection,  50. 

Information,  bureaus  of,   207. 

Insular   affairs,    200. 

Insurance  charges  in  trade 
balances,  22(1. 

Internal    taxation,    Ch.    X. 

Internal  taxes,  definition  of, 
163,  127,  128:  on  domestic 
products  destined  for  ex- 
portation,   129,    130. 

Internal  taxation  on  im- 
ported merchandise,  128, 
129. 

Interstate  preferential  duties, 
107,    108. 

Inventions,    effect    of    great, 
22. 
279 


INDEX 


Investments,  foreign,  in  trade 
balances,   227. 

Invisible  exports  and  im- 
ports, 226,  228. 

Invoices,  consular,  102,  103, 
220. 

Italian  city-republics,  com- 
mercial treaties  of,  146 ; 
exclusion   policy   of,  236. 

Italy,  commercial  treaties 
with,  148;  export  syndi- 
cates in,  211,  213;  free 
ports  in,  119;  method  of 
value  estimation  in.  220 ; 
reciprocity  with,  168;  tar- 
iff (general  and  conven- 
tional) in,  93  ;  anticipated 
changes   in   tariff   of,   91. 

Japan,  commercial  museums 
in,  207  ;  export  duties  in, 
34 ;  prohibitions  in,  8  :  tar- 
iff, general  and  convention- 
al in,  93  ;  tariff  schedule  in 
treaty  with,  156;  treaty  of 
1854  with  U.  S.,  character 
of,  154;  treaty  of  1858  with 
U.  S.,  revision  clause  in, 
150;  treaty  ports   of,   124. 

Japanese-German  treaty, 
scope  of  most  favored  na- 
tion clause  in,    172. 

Jefferson,  recommendation  for 
coast  and  geodetic  survey, 
254- 

Jungholz,  part  of  German 
ZoUverein,  91. 

La  Plata  river,  navigation  of, 

157. 
Laissez-faire      (see      various 

countries),   38. 
Land   trad^,  8. 
Leagues,    city,    character    of, 

13,    early   history    of,    17. 
Lichtenstein,  part   of  Austro- 

Hungarian    ZoUverein,    81  ; 


280 


right  to  negotiate  commer- 
cial  treaties,    149. 

Life-Saving   Service,   256. 

Light-House  Board,  253,  254. 

List,  F.,  49. 

Liverpool,  American  chamber 
of  commerce  at,  211. 

Loans,  foreign,  in  trade  bal- 
ances, 226. 

Locke,    John,    2>T- 

London    as   a    clearing-house, 

22"],     22g. 

Liibeck,  a  free  port,  119,  120. 

Luxemburg,  part  of  German 
ZoUverein,  91  ;  right  of, 
to  negotiate  commercial 
treaties,    149. 

McKinley,  elected  president, 
54;  tariff  act,  purpose  of, 
53- 

Mail  premiums,  241. 

Manufactures,  Bureau  of, 
198-200. 

Manufactures  of  U.  S.,  Na- 
tional  Association    of,    210. 

Mare  Clausum,  23^-225. 

Marine  Hospital  Service, 
Public  Health  and,  255, 
256. 

Marvin  on  Postal  Subsidy 
bill,  245. 

Materials   of  commerce,  6,  7. 

Maximum  and  minimum  tar- 
iff system  (see  "tariff  sys- 
tems"), 148;  ditto  in 
France,   167. 

Measure  basis  for  statistics, 
219,   221. 

Mercantilism,  Ch.  XVI  j 
bounties  under,  132;  char- 
acteristics of,  23,  24 ;  criti- 
cism of,  27-29 ;  as  a  do- 
mestic policy,  27,  32 ;  ex- 
port duties  under  (see 
"balance  of  trade"),  73 ; 
first  and  second  phases  of, 
24,    25  ;    political    and    eco- 


INDEX 


nomic  revolt  against,  37, 
38  ;  prohibitions  under  (Ch. 
II),  it;  protection  com- 
pared with,  47  ;  Smith,  view 
of,  39  ;  third  phase  of,  25- 
2^  ;  transit  duties  under,  76. 

Mercantilist  idea  of  balance 
of  trade,  224. 

Mercantile  agencies,  foreign, 
208,   213. 

Mercantile  commissions  in 
various  countries,    104. 

Merchandise,    definition    of,  7. 

Merchant  marine  of  U.  S., 
245-248 ;  economic  argu- 
ment for,  247,  248 ;  politi- 
cal argument  for,  247, 
248  ;  Gallinger  commission 
on,   246. 

Methuen   treaty,    146. 

Mexican  Free  Zone,  123,  124. 

Mexican-American  arbitration 
treaty,    157. 

Middle  Ages,  commercial  pol- 
icy of,  13  ;  political  con- 
trol of  commerce  in,  9 ; 
transit   trade  in,    "j^. 

Middle  European  commercial 
treaties,    148. 

Mill,  J.  S.,  43- 

Mississippi  river,  treaties  re- 
garding,   IS3,   157. 

Mittleberg,  a  part  of  German 
Zollverein,  91. 

Modern  conception  of  com- 
merce, 3,  4. 

Modern  period,  general  char- 
acter of  early,   21. 

Monaco,  a  part  of  French 
tariff  union,   91. 

Montesquieu   on    influence   of 

commerce,   5. 
Monthly    Summary    of    Com- 
merce   and    Finance,     198, 
221. 
Morality,    prohibitions    based 

on,  81,  82,  154. 
Moseley  commission,  202. 


281 


Most  favored  nation,  Ch. 
XII;  meaning  of,  169;  re- 
stricted or  American,  170, 
171;  scope  of,  171-173; 
tariff  and,  152,  153;  treat- 
ies of,  152-154;  unre- 
stricted  or   European,    171. 

Museums  (see  "Philadelphia 
commercial  museum"),  207. 

Napoleonic  wars,  economic 
effect  of,  40,  42. 

National  independence  argu- 
ment   for    protection,    50. 

Navigation,  annual  volume 
on  Commerce  and,  198, 
221. 

Navigation,  acts  of  England, 
34,  105  ;  Bureau  of  and 
Shipping  Commissioners, 
252.  253  ;  policy  of  U.  S., 
50,  238,  239  ;  politics,  Ch. 
XVII  (general  233,  234; 
mare  clausum,  234,  235 ; 
freedom  of  navigation,  235, 
236 ;  navigation  laws,  z^^d, 
22,-j  ;  English  navigation 
policy,  zzT,  238 ;  naviga- 
tion policy  of  U.  S.,  238, 
239  ;  character  of  shipping 
subsidies,  241,  242:  early 
American  shipping  subsidy 
policy,  242-244 ;  postal  sub- 
sidy act,  244-246 ;  argu- 
ments for  and  against  navi- 
gation laws,  247,  248)  ; 
premiums,  241  ;  promoting 
institutions,  Ch.  XVIII 
(general,  251,  252;  Bu- 
reau of  Navigation  and 
Shipping  Commissioners, 
252,  253  ;  Steamboat  Inspec- 
tion Service,  253 ;  Light- 
House  Board,  253,  254; 
Coast  and  Geodetic  Sur- 
vey, 254,  255  :  Public 
Health  and  Marine  Hos- 
pital    Service,     255,     256; 


INDEX 


Life-Saving    Service,    256  ; 
Revenue      Cutter      Service, 

256,  257 ;     Navy     Depart- 
ment,  257,    258). 

Navy  Department,  relation 
to     commerce,     252,      253, 

257,  258. 

Navy  inspector  of  light- 
houses,  254. 

Navy  supplies  in  American 
vessels,    246. 

Netherlands  (see  "Belgium" 
and  "Holland"),  under 
mercantilism,    30-32. 

Newspapers,  etc.,  free  im- 
portation   of,    141. 

New  Zealand,  colonial  prefer- 
ential  policy  of,    109. 

Nicaragua,  reciprocity  with, 
168. 

Non-intercourse  act,  effect  of, 
on  protection,   50. 

North  Sea,  claims  of  Eng- 
land to,    234. 

Norway  (see  Scandinavia), 
export  duty  in,  75  ;  tourist 
expenditure   in,    228. 

Norway  and  Sweden,  prefer- 
ential   tariff   between,    107. 

Official    classes    on   tariff,   43. 
Origin,   country  of,    221,    222. 

Pacific  Mail  Steamship  Com- 
pany, 243,  244. 

Pan-American   Congress,  202. 

Panama  Canal,  construction 
of,  200 ;  neutralization  of, 
157- 

Par,  above  and  below,  in  ex- 
change, 229. 

Paraguay,  export  duty  in,  74. 

Parana  river,  navigation  of, 
157- 

Paris,  American  chamber  of 
commerce  in,  211,  treaty 
of,  235. 

Passive  trade,  8. 


282 


Patten,  S.  49. 

Pauper  labor  argument  for 
protection,  51. 

Pauper  labor  goods,  prohi- 
bition of  importation  of, 
78. 

Percentages  in  statistics,  223. 

Persia,  export  duty  in,  74 ; 
prohibitions  in,  78,  81  ; 
tariff  administration  in,  90. 

Personal  eft'ects  of  returning 
travellers,  free  re-importa- 
tion of,  138,   139. 

Philadelphia  Commercial  Mu- 
seum, 202,  208,   209. 

Philippines,  civil  records  of, 
201  :  coasting  trade  of,  246; 
tariff    prohibitions   in,    82. 

Phoenicians,  trade  of,  12,  13. 

Physiocratic  System,  38; 
A.    Smith   on,   39. 

Police  export  duties,   "](>. 

Political  control  of  com- 
merce,   9. 

Political  Science,  definition 
of,  8. 

Politics,  commercial,   8,   9. 

Poll  tax,    127. 

Porto  Rico,  civil  records  of, 
201  ;  and  U.  S.,  preferen- 
tial tariff  between,   107. 

Ports,  of  entry,  115;  of  de- 
livery,   115. 

Portugal,  claims  of,  to  high 
seas,  234 ;  commercial  pol- 
icy of,  60 ;  export  duty  in, 
74  ;  mercantilism  in,  29,  30  ; 
Methuen  treaty  between 
England  and,  146 ;  reci- 
procity between  U.  S.  and, 
168;  Spain  and,  preferen- 
tial  tariff  of,   107. 

Postal  subsidy  act,  (see 
"navigation  politics"  and 
"shipping  subsidies"),  244- 
246. 


INDEX 


Preamble  of  commercial 
treaties,  154. 

Preferential  duties,  colonial, 
io8,  109;  interstate,  107, 
108. 

Premiums  (see  "construction 
premiums,"  "equipment 
premiums,"  "navigation 
premiums,"  mail  premi- 
ums"). 

Price    basis    in    tariffs,     100, 

lOI. 

Prison  labor  goods,  prohibi- 
tion of,   78. 

Private  or  quasi-public  trade 
promoting  institutions,  Ch. 
XV. 

Product,   definition   of,    7. 

Prohibitions,  Ch.  VI,  77-84 ; 
administration  of,  Tj ,  78 ; 
in  commercial  treaties,  154; 
under  mercantilism,  yy  ;  on 
moral  and  religious  grounds, 
81,  82 ;  protection  and  re- 
venue, 78,  79 ;  on  grounds 
of  public  security,  82-84 ; 
on  sanitary  grounds,  79, 
80  ;  transit,  import  and  ex- 
port,   T7,   78. 

Property  tax,  general,   127. 

Protection,  (see  various  coun- 
tries and  various  classes, 
academic,  agricultural,  com- 
mercial, industrial,  official), 
Ch.  IV ;  agricultural  and 
industrial,  64 ;  causes  of 
recent  growth  of,  48,  49 ; 
character  of,  47,  64 ;  Cleve- 
land on,  S3,  54;  democratic 
party  on,  53,  54 ;  era,  Eu- 
ropean treaties  of,  147, 
148 ;  in  Europe,  59,  60 ; 
export  duties,  74,  75  ;  in 
France,  56-58  :  in  Germany, 
58,  59 ;  import  duties,  65  ; 
main  arguments  for,  49-51  ; 
mercantilism  and,   47  ;  pro- 


hibitions, 78,  79  ;  in  U.  S., 
51-56. 

Prussia,  discriminating  navi- 
gation  policy  of,   2^1. 

Prussian  treaty,  duration  of, 
150;  of  1785,  reciprocity 
in,   162. 

Public  Health  and  Marine 
Hospital   Service,  255,  256. 

Public  navigation  promoting 
institutions,     Ch.    XVIII. 

Public  security,  prohibitions 
on   ground  of,   82-84,    155. 

Public  trade  promoting  in- 
stitutions,   Ch.    XIII-XIV. 

Quesnay,  38. 

Railway  rates  on  imported 
and    exported   goods,    135. 

Rating,  commercial,  meaning 
of,   213. 

Raw  materials,  import  duties 
on,   66. 

Reciprocal  liberty  of  com- 
merce,  meaning   of,    154. 

Reciprocity,  Ch.  XII  (mean- 
ing of,  161,  162;  first  phase 
of  American  reciprocity, 
162,     220;     second     phase, 

162,  163,   240;   third  phase, 

163,  164,  240:  fourth  phase, 

164,  165  ;  fifth  phase,  165, 
166,  240;  sixth  phase,  166, 
167;  seventh  phase,  167, 
168;  eighth  phase,  168, 
169)  ;  relation  to  American 
most  favored  nation  right, 
T70;  treaties,  free  list  in, 
141  ;  treaties  of  U.  S., 
character  of,  153 ;  tariff 
schedules   in,    156. 

Reformation,    21. 

Registry  of  American  vessels, 

239,  240,  245. 
Religion,     prohibitions    based 

on,  81,  82. 
'    Renaissance,  21. 


283 


INDEX 


Republican  party  on  protec- 
tion,  55. 

Restricted  (or  American) 
most  favored  nation  policy, 
170. 

Retail,  definition  of,   7,  8. 

Retaliatory    duties,    no,    in. 

Revenue  Cutter  Service,  256. 

Revenue  duties,  64 ;  export, 
74,  75  ;  import,  65  ;  prohi- 
bitions,  78,  79. 

Revision  clause  of  treaties, 
150. 

Rhine,    navigation    of,    156. 

Ricardo,  D.,  43. 

Richard  II,  navigation  act  of, 
237. 

Rivers  and  harbors,  treaties 
regarding,  156,  157,  235, 
236. 

Roman  commercial  policy, 
13 ;  conception  of  com- 
merce,   13. 

Rome,  commercial  treaty  of, 
with    Carthage,    146. 

Roosevelt,  on  needs  of  a 
navy,    258. 

Roumania,  tariff  war  between 
Austria   Hungary  and,    no. 

Rousseau,  37. 

Russia,  commercial  attaches 
in,  1 92  ;  commercial  policy 
of,  60  ;  maximum  and 
minimum  tariff  in,  94-96, 
148  ;  methods  of  value  es- 
timation in,  220  ;  payment 
of  duties  in  gold  in,  104; 
prohibitions  in,  81,  82; 
rights  of,  in  Black  Sea, 
235  :  tariff'  war  between 
Germany  and,  no;  transit 
duties   in,   76. 

Saint  John  river,  navigation 
of,   156. 

Saint  Lawrence  river,  navi- 
gation  of,    156. 


Salt,  drawback  on  imported, 
132. 

Sample  warehouses,  export, 
209,  210. 

San  Domingo,  tariff  adminis- 
tration in,  90. 

Sanitation,  prohibitions  based 
on,  79,  80. 

Scandinavian  countries,  com- 
mercial policy  of,  59. 

Sea  (see  "freedom  of  navi- 
gation," "mare  clausum")  ; 
trade,   8. 

Seamen  (see  "commercial 
legislation"). 

Servia,  export  duty  in,  74 ; 
general  and  conventional 
tariff  in,  93. 

Shaw,  ex-Secretary,  on 
"bonded  zone  for  export," 
121,    122. 

Shanghai,  export  sample 
warehouse   at,   210. 

Ship  building  material,  free 
importation   of,   140,  241. 

Shipping  Commissioners,  Bu- 
reau of  Navigation  and, 
252,   253. 

Shipping  subsidies  (see  "navi- 
gation politics"),  character 
of,  240,  241  ;  early  Ameri- 
can, 242-244 ;  and  postal 
subsidy  act,   244-246. 

Siam,  most  favored  nation 
treaty  between  U.   S.,  and, 

173- 

Silver,  issue  in  1896,  54; 
and  gold,  in  statistics,  219, 
226. 

Singapore,   a    free    port,    120. 

Slave  trade,  prohibitions 
against,   82. 

Smith,  A.,    39. 

South  Africa,  colonial  prefer- 
ential policy  of,  109;  ex- 
port duties  in,   75. 

South  America,  commercial 
treaties  betv.een  U.  S.,  and. 


284 


INDEX 


147 ;  export  duties  in,  74, 
75 ;  general  and  conven- 
tional tariff  in,  92 ;  im- 
port duties  in,  66 ;  prohi- 
bitions in,  82. 

Spain,  anticipated  tariff 
changes  in,  91  ;  claims  of, 
to  high  seas,  234 ;  colonial 
preferential  policy  of,  108; 
commercial  policy  of,  60 ; 
discriminating  duties  in 
tariff  of,  105  ;  export  du- 
ties in,  74 ;  maximum  and 
minimum  system  in,  94,  95, 
148;  mercantile  commission 
in,  104;  mercantilism  in, 
29,  30 ;  and  Mississippi 
river,  157;  tariff  war  be- 
tween   Germany    and,    no. 

Special  commerce,  meaning 
of,   217. 

Specific  duties,  advantages 
and  disadvantages  of,  loi, 
102. 

State,  U.  S.  Department  of, 
178,  179, 

Statistical  Abstract  of  U.  S., 
198,  22. 

Statistical  comparisons,  222- 
224. 

Statistics,  Ch.  XVI  (defini- 
tion of  commercial  statis- 
tics, 216,  217;  classifica- 
tion of  commercial  statis- 
tics, 217-219  :  general  meth- 
ods of  obtaining  commer- 
cial statistics,  220,  221  ; 
American  methods  of  ob- 
taining, 220,  221  ;  difficul- 
ties of  statistical  compari- 
sons, 221,  222  ;  methods  of 
statistical  comparisons,  222- 
224.)  ;  Bureau  of  (U.  S. 
Department  of  Agricul- 
ture), 196;  Bureau  of  (U. 
S.  Department  of  Com- 
merce and  Labor),  197,  i( 


28s 


Steamboat  Inspection:  Serv- 
ice,  253. 

Steamship  subsidies  (see 
"shipping   subsidies"). 

Steelmakers,  German,  boun- 
ties by,    135. 

Student  interpreters,  183,  187- 
189. 

Stuttgart,  first  export  sample 
warehouse   in,  210. 

Subsidies  (see  "shipping  sub- 
sidies"). 

Sudan,  export  duty  in,  74; 
prohibitions   in,   81. 

Sugar,  bounty  question,  in- 
ternational, 136,  137;  ex- 
port bounty  on,  133-135 ; 
most  favored  nation  ex- 
emption of,  in  treaty  be- 
tween France  and  Austria, 
172;  reciprocity  in,  166- 
169. 

Sweden  (see  "Scandinavia"), 
Baltic  claims  of,  234 ;  ex- 
port duties  in,  75  ;  most 
favored  nation  treaty  of, 
169. 

Switzerland,  commercial  pol- 
icy of,  59  ;  export  duty  in, 
75  ;  reciprocity  with,  168; 
statistical  method  in,  220; 
tariff  war  between  France 
and,  no;  tourist  expendi- 
tures in,  228 ;  treaties  be- 
tween  Germany  and,    148. 

Tare,    102. 

Tariff,  classification  of,  98, 
99 ;  contents  of  American, 
87,  88 ;  definition  of,  64, 
86 ;  enactment  and  admin- 
istration of,  89,  102-104; 
general  and  conventional 
92,  93  ;  general  or  autono- 
mous, 92  ;  maximum  and 
minimum,  94-96  ;  revenue 
effect  of  changes  of,  91  ; 
tariff    systems    and,    Ch. 


INDEX 


VII ;  territorial  scope  of, 
go,  91  ;  treaties,  152-154, 
156;  trusts  and  the,  70; 
views  on  the  (see  "aca- 
demic classes,"  "agricul- 
tural classes,"  "commer- 
cial classes,"  "industrial 
classes,"  "official  classes")  ; 
wars,    no. 

Taussig,  F.  W.,   167. 

Tax,  who  pay  the?   67,  73. 

Taxation,  two-fold  system  of, 
62,  63. 

Togoland,  police  export  du- 
ties  in,    76. 

Tonnage  duties  (see  "ves- 
sels"), reciprocity  in,  162, 
16s,    166. 

Tools  of  trade,  etc.,  free  im- 
portation  of,    141. 

Tourists,  remittances  to,  228. 

Trade,  active,  8 ;  commerce 
vs.,  6;  commissions,  201, 
202  ;  direct,  8  ;  domestic,  8  ; 
export,  8 ;  foreign  and  in- 
ternal, 8 ;  import,  8 ;  in- 
direct, 8  ;  land,  8  ;  passive, 
8 ;  Relations,  Bureau  of, 
179;   sea,  8;   transit,  8. 

Trade  marks,  prohibitions  of 
infringements   on,   79. 

Trade-promoting  institutions, 
miscellaneous,  213,  214; 
public,  Ch.  XIV ;  quasi- 
public  and  private,  Ch.  XV. 

Transit    duties,    73,   76,   TT. 

Transit    prohibitions,    TJ ,    78. 

Transportation  charges  in 
trade   balances,    226. 

Transvaal,    transit   duties    in, 

76. 
Travellers,     remittances     to, 

zzy,   228. 
Treasury     Department     of 

U.   S.,   194.   251. 
Treaties,      commercial,      reci- 
procity   and    most    favored 
nation    clause    (Ch.    XII)  ; 
Ch.    XI     (definitions,     145- 


147  ;  European  commercial 
treaties  of  free  trade  era, 
147  ;  European  commercial 
treaties  of  protection  era, 
147,  148  ;  what  states  may 
negotiate  commercial  treat- 
ies, 148,  149 ;  who  may 
negotiate  commercial  treat- 
ies, 149,  150;  duration  of 
commercial  treaties,  150, 
151  ;  protocol,  151  ;  sub- 
ject matter  of  commercial 
treaties,  151,  152;  groups 
of  commercial  treaties,  152- 
154;  provisions  of  commer- 
cial treaties,  154-158)  ;  ar- 
bitration ciause  in  treaties, 
i57>  158;  navigation  of 
certain  rivers  in,  156,  157; 
schedule  of  duties  in,  155, 
156. 

Treaty,  commercial,  of  1786, 
40 ;   Cobden,   44. 

Treaty  ports,    124. 

Trieste,  part  of  Austro-Hun- 
garian  Zollverein,  91  ;  dis- 
criminating duties  at,  105  ; 
a   free  port,    119. 

Trusts  and  dumping,  69,  70 ; 
and  tariff,  70. 

Turkey,   export   duty  in,  74. 

Turkish  capitulations,  146 ; 
rights  in   Black   Sea,    235. 

United  States  (see  "Amer- 
ica") ;  Agricultural  De- 
partment of,  195-197  ;  Com- 
merce and  Labor  Departi 
ment  of,  197-200:  consti- 
tutional power  of,  regard- 
ing commerce,  10,  108,  239; 
id  regarding  treaties,  149? 
discriminating  tonnage  du- 
ties in  tariff  of,  106;  draw- 
back system  in,  131,  132; 
empty  packages  imported 
into,  137;  exhibition  art- 
tides  imported  into,  137? 
138;     export    bounties     in. 


286 


INDEX 


133;  exports  declared  for, 
220 ;  foreign  investments 
in,  22"]  ;  free  trade  in,  41, 
42 ;  imports,  receipts  from, 
in,  67 ;  internal  taxes  on 
domestic  products  from, 
130 ;  merchant  marine  of, 
245-248 ;  and  Mexico,  ar- 
bitration treaty  between, 
I57>  158;  most  favored  na- 
tion treaty  between  France 
and,  170;  most  favored  na- 
tion interpretation  of,  re- 
lation to  reciprocity,  170: 
navigable  rivers,  rights  of, 
156-159,  236;  navigation 
policy  of,  238,  239 ;  pay- 
ment of  duties  in,  104-106  ; 
preferential  duties  be- 
tween Porto  Rico  and,  107  ; 
history  of  protection  in, 
41-55  ;  protection  prohibi- 
tions in,  78 :  prohibitions 
in,  81  ;  reciprocity  in,  162- 
169;  revision  clause  in 
treaty  between  Japan  and, 
150;  shipping  subsidies, 
early,  of,  242-244 ;  State 
Department  of,  178,  179; 
Statistical  Abstract  of,  198, 
221  ;  tariff  administration 
and  enactment  in,  89,  90, 
102-104,  Ch.  IX;  tariff 
systems  of,  92 ;  territorial 
scope  of,  tariff  in,  90,  91  ; 
travellers  effects  in  tariff 
of,  138,  139;  treaties,  com- 
mercial, of,  147;  Treasury 
Department  of,  194,  195  ; 
War  Department  of,  200, 
201. 

United  Kingdom  (see  "Eng- 
land"), administration  of 
prohibitions   in,    78. 

Unrestricted  (or  European) 
most  favored  nation  clause, 
171. 

Uruguay  river,  navigation  of 
157. 


Utility,  meaning  and  kinds 
of,   5. 

Value,  basis  in  tariff  (see 
"ad  valorem  duties"),  100, 
219,  220,  221  ;  declaration, 
method  of,  219,  220;  esti- 
mation,   219,    220. 

Venice,  authority  of,  over 
Adriatic,   234. 

Vessels  (see  "navigation  pro- 
moting institutions"),  army 
and  navy  supplies  in,  246  ; 
discriminating  duties  on, 
and  cargoes,  105,  106,  163  ; 
free  importation  of  ma- 
terials for,  140  ;  registry  of 
American,  239,  240,  252. 

Vested  interest  argument,  for 
protection,  51. 

Visible  exports  and  imports, 
225,  226. 

War,  effect  of,  on  protection, 
48,  49  :  Civil,  effect  of,  on 
protection,  52;  of  1812,  ef- 
fect of,  on  protection,  50 ; 
U.  S.  Department  of,  200, 
201. 

Ware  or  wares,  definition 
of,  7. 

Warehouses  (see  "bonded 
warehouses"),  export  sam- 
ple,  209,  210. 

Washington  treaty,  arbitra- 
tion  clause   in   the,   157. 

Wealth,   meaning  of,   5. 

Wealth   of  Nations,  39. 

Wearing  apparel,  free  impor- 
tation  of,   142. 

Weight  basis  of  statistics 
(see  "specific  duties"),  219. 

West  Indies,  discriminating 
duties  with,  163;  abolition 
of  discriminating  duties, 
with,  163,  164:  export  du- 
ties in,   74,  75  ;   export  su- 


287 


INDEX 


gar  bounties   in,   eflfect   of, 

137;     prohibitions    in,    82; 

reciprocity  with,    168. 
Wheat,    export   bounty    on 

British,    133. 
Wholesale,    definition    of,    8. 
Wholesale    price,   value    basis 

on,  221. 
Wilson,  William,   208. 


Wilson-Gorham   bill,   54. 
World  commerce,  8. 

Zollverein,  German  character 
of,  107,  108  ;  formation  of, 
43  ;  F.  List  vs.,  50 ;  most 
favored  nation  treaty  be- 
tween England  and,  172; 
id,  Belgium,   171. 


288 


A  Book  of  Importance  to  Any  with 
Commercial  Interests  in  the  Orient 

CHINA 

IN   LAW  AND  COMMERCE 

By  T.  R.  JERNIGAN 

A  book  which  contains  incidentally  a  very 
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commercial  relations,  involving-  holding  of  proper- 
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